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Human Capital Accumulation, Income Distribution and Economic Growth: A Neo-Kaleckian Analytical Framework

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  • Gilberto Tadeu Lima
  • Laura Carvalho, Gustavo Pereira Serra

Abstract

This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a Neo-Kaleckian analytical framework of distribution and growth. Human capital accumulation positively impacts on workers’ productivity in output production and their bargaining power in wage negotiations. Differences in tax rates on wage and profit income have distributive implications for consumption and investment and so shape how effective demand varies with income distribution. In the long-run equilibrium, a rise in workers’ (capitalists’) bargaining power raises (lowers) the pre- and after-tax wage share, which raises (reduces) the rates of physical capital utilization, employment (which also measures the rate of human capital utilization) and output growth. Meanwhile, a rise in a uniform tax rate (which also denotes the share of tax spending in public education in output) lowers the long-run equilibrium values of the pre- and after-tax wage share and the rates of physical capital utilization, employment and output growth. Paradoxically, in the long-run equilibrium, a higher share of investment in human capital in output lowers the rate of human capital accumulation, with which output growth varies positively. A strengthening in the bargaining power of workers is output growth-enhancing in the long-run equilibrium, and it does so by raising the rates of accumulation of both physical and human capital.

Suggested Citation

  • Gilberto Tadeu Lima & Laura Carvalho, Gustavo Pereira Serra, 2018. "Human Capital Accumulation, Income Distribution and Economic Growth: A Neo-Kaleckian Analytical Framework," Working Papers, Department of Economics 2018_19, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2018wpecon19
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    More about this item

    Keywords

    Human capital; income distribution; economic growth; employment;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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