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Human Capital Evolution and Economic Crisis: Minding 'The Gap'

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Abstract

When an economy experiences crisis that reduces the level of human capital stock, such a change should be accompanied by a change in the investment level. Is this always the best thing to do? In an optimal growth model of human capital evolution this paper shows that cutting down investment during crisis may not always be the optimal response to crisis. At certain levels of human capital, maintaining the pre-crisis level of investment is optimal and may be crucial to economic success.

Suggested Citation

  • Titilola O. Giwa, 2001. "Human Capital Evolution and Economic Crisis: Minding 'The Gap'," Royal Holloway, University of London: Discussion Papers in Economics 00/9, Department of Economics, Royal Holloway University of London, revised Feb 2001.
    • Handle: RePEc:hol:holodi:0009
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    File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0009.pdf
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    More about this item

    Keywords

    Crisis; 'the gap'; Optimal Investment; Human Capital Evolution;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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