Chapter

Human Capital and Income Distribution

Pranab Bardhan and Christopher Udry

in Development Microeconomics

Published in print May 1999 | ISBN: 9780198773719
Published online November 2003 | e-ISBN: 9780191595929 | DOI: http://dx.doi.org/10.1093/0198773714.003.0010
 Human Capital and Income Distribution

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Explores the idea that there is joint causation between income and human capital and that this may generate a poverty trap. It first looks at empirical results on this two‐way causality, namely, at estimates of the income elasticity of demand for calories and of the effect of education on productivity. It then presents a model of income distribution in an economy with a feedback between income and human capital. The model illustrates how this joint causation, when accompanied by increasing returns in human capital investment and capital market imperfections, may result in persistent income inequality.

Keywords: calorie demand; education; human capital; imperfect markets; income distribution; income inequality; increasing returns; poverty trap; productivity

Chapter.  4174 words. 

Subjects: Economic Development and Growth

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