Commodity Booms, Human Capital, and Economic Growth: An Application to Colombia

The idea that a trade-off exists between current levels of consumption and future levels of human capital is modeled. As shocks in international commodity prices affect income and modify the optimal consumption basket, household members adjust their time preferences between school and work. As a res...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Giraldo, Iader, Arguello, Ricardo, Herrera, Nataly
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2019
Subjects
Commodities
Consumption
Economic growth
Human capital
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Summary:The idea that a trade-off exists between current levels of consumption and future levels of human capital is modeled. As shocks in international commodity prices affect income and modify the optimal consumption basket, household members adjust their time preferences between school and work. As a result, the dynamics of human-capital accumulation may be affected and, in cases in which commodity production and trade play a significant role in the economy, such dynamics may also have an impact on economic growth and the composition of economic sectors. Using a dynamic CGE model and Colombian macroeconomic data, we showed how shocks in commodity prices determined households’ educational demands and, at the same time, the composition of the labor market.