Gomes, Orlando (2007): Decentralized allocation of human capital and nonlinear growth.

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Abstract
The standard twosector growth model with physical and human capital characterizes a process of material accumulation involving simple dynamics; constant long run growth is observable when assuming conventional CobbDouglas production functions in both sectors. This framework is developed under a central planner scenario: it is a representative agent that chooses between consumption and capital accumulation, on one hand, and between allocating human capital to each one of the two sectors, on the other. We concentrate in this second choice and we argue that the outcome of the aggregate model is incompatible with a scenario where individual agents, acting in a market economy, are free to decide, in each time moment, how to allocate their human capital in order to produce goods or to create additional skills. Combining individual incentives, the effort of a central planner (i.e., government) to approximate the decentralized outcome to the optimal result and a discrete choice rule that governs the decisions of individual agents, we propose a growth framework able to generate a significant variety of long term dynamic results, including endogenous fluctuations.
Item Type:  MPRA Paper 

Institution:  Escola Superior de Comunicação Social  Instituto Politécnico de Lisboa 
Original Title:  Decentralized allocation of human capital and nonlinear growth 
Language:  English 
Keywords:  Endogenous growth; Human capital; Endogenous business cycles; Discrete choice; Nonlinear dynamics; Chaos 
Subjects:  C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis O  Economic Development, Innovation, Technological Change, and Growth > O4  Economic Growth and Aggregate Productivity > O41  One, Two, and Multisector Growth Models E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E32  Business Fluctuations ; Cycles 
Item ID:  2882 
Depositing User:  Orlando Gomes 
Date Deposited:  24. Apr 2007 
Last Modified:  15. Feb 2013 20:52 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/2882 