Human Capital Investment, Inequality, and Economic Growth

We treat rising inequality as an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest, how much to acquire, and the intensity of use. The latte...

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Bibliographic Details
Published inJournal of labor economics Vol. 34; no. S2; pp. S99 - S127
Main Authors Murphy, Kevin M., Topel, Robert H.
Format Journal Article
LanguageEnglish
Published Chicago The University of Chicago Press 01.04.2016
University of Chicago Press
University of Chicago, acting through its Press
Subjects
Economic growth
Human capital
Inequality
Labor supply
Studies
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Summary:We treat rising inequality as an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest, how much to acquire, and the intensity of use. The latter two represent the intensive margins of human capital acquisition and utilization. These choices are substitutes for the creation of new skilled workers, yet they are complementary with each other, magnifying inequality. When skill-biased technical change drives economic growth, greater inequality reduces growth.
ISSN:0734-306X
1537-5307
DOI:10.1086/683779