Journal article
Public investment and human capital with segmented labour markets
- Abstract:
- We develop a dynamic general equilibrium macroeconomic model with segmented labour markets and efficiency wages to examine how labour market structures influence the impact of human capital investment in low-income countries. For plausible calibration values, public investment in education is much more effective than infrastructure investment in promoting long-run economic development, but because investment in education affects labour productivity with a lag, policymakers face an intertemporal trade-off which depends on their social discount rate and the weight of distributional objectives in the social welfare function. We show the distortionary structure of labour markets matters in leveraging welfare gains from public investment and in shifting the optimal public investment programme further in favour of human capital, relative to the case of flex-wage full-employment labour markets.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, Version of record, pdf, 584.0KB, Terms of use)
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- Publisher copy:
- 10.1093/oep/gpac051
Authors
- Publisher:
- Oxford University Press
- Journal:
- Oxford Economic Papers More from this journal
- Volume:
- 76
- Issue:
- 1
- Pages:
- 162–186
- Publication date:
- 2022-12-14
- Acceptance date:
- 2022-11-30
- DOI:
- EISSN:
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1464-3812
- ISSN:
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0030-7653
- Language:
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English
- Pubs id:
-
1317672
- Local pid:
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pubs:1317672
- Deposit date:
-
2023-01-09
- ARK identifier:
Terms of use
- Copyright holder:
- Oxford University Press
- Copyright date:
- 2022
- Rights statement:
- © Oxford University Press 2022. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial License (https://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
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