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Heterogeneous Agents, Human Capital Formation and International Income Inequality

Author

Listed:
  • Haris Munandar

    (Bureau of Economic Research, Bank of Indonesia, Jakarta, Indonesia)

Abstract

The paper examines the effect of heterogeneity in individual human capital formation on cross-country income inequality. It considers a two-country model of overlapping generation heterogeneous economies with the following features: (1) individuals are heterogeneous with respect to inborn ability and parental human capital; (2) intergenerational transfers take place via public investment in education financed by tax, and parental education; (3) due to variation in individual human capital, we have endogenous heterogeneity both in labor supply and in parents’ participation in self-educating their offspring. Besides exploring cross-country variation in public education, how its low level can lead to a poverty trap and how its high level can result in an increasing society’s effective human capital, we study the effects of capital markets integration, in equilibrium, on the intra-generational income inequality in both the investing and receiving countries.

Suggested Citation

  • Haris Munandar, 2008. "Heterogeneous Agents, Human Capital Formation and International Income Inequality," Tinbergen Institute Discussion Papers 08-015/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20080015
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    File URL: https://papers.tinbergen.nl/08015.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogenous Agents; Human Capital; Poverty Efrap; Income Inequality;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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