Essays on the interactions between population and human capital, and consequences to economic growth

Abstract

This thesis comprises of three major chapters concerning the effects of demographic factors on aggregate human capital and through it on economic growth.

Although human capital can exist only embodied in individuals, this embodiment property has been relatively neglected in the literature. Chapter 3 aims in showing that exactly because of this property, the demographic features of an economy are very important for this economy's aggregate human capital and through it economic growth. In particular, instead of assuming an aggregate accumulation function of human capital, as in the literature, in chapter 3 I rather aggregate the education decisions of the individual economic agents. The result is that the demographic features of an economy affect its human capital accumulation in various ways, missed when one aggregates the accumulation function instead of the education decisions of the economic agents.

Although the endogenous technology literature recognises human capital as the power that drives technology and through it economic growth, it usually treats it as exogenous and fixed. As a result, it finds a linear relationship between the population size or growth rate and technological improvement. In chapter 4 I introduce human capital investment in an endogenous technology framework. It is shown that even without the effects of the previous chapter, population affects technological improvement both directly and through the stream of human capital, with technology also having a feedback effect on the latter. Multiple are therefore the effects of demographic factors on innovation and economic growth, which can explain certain facts, the most important of which is the growth patterns of the last two centuries.

Borrowing constraints on households have been found to have positive effects on physical and negative on human capital accumulation and economic growth. However, fertility is too expected to be affected by borrowing constraints, while it also interacts with the accumulation of both types of capital. The effects of borrowing constraints under assumptions of endogenous population is exactly what chapter 5 studies.

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