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Multiple equilibria, fiscal policy, and human capital accumulation

✍ Scribed by Jaime Alonso-Carrera; Marı́a Jesús Freire-Serén

Publisher
Elsevier Science
Year
2004
Tongue
English
Weight
301 KB
Volume
28
Category
Article
ISSN
0165-1889

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✦ Synopsis

This paper shows that in a three-sector model of endogenous growth with physical and human capital accumulation, taxation policy can generate indeterminacy under plausible parameterizations. The key for this result is that the accumulation of human capital is a non-market activity in which individuals combine their non-working time with intermediate goods that are provided by the market. This assumption is consistent with the microfoundations of human capital accumulation found by the literature on life-cycle earnings.

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