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Title: Technological Frontier, Education and Growth
Keywords: technological frontier, growth, education, income inequality, inverted-U
Issue Date: 31-May-2006
Citation: FENG SHUANG (2006-05-31). Technological Frontier, Education and Growth. ScholarBank@NUS Repository.
Abstract: This thesis examines the interactions among education, economic growth and income inequality in an endogenous growth model with improvements in the quality of products. We extend the framework of Vandenbussche, Aghion and Meghir (2004) to allow for endogenous formation of human capital.In our model, human capital, economic growth and income inequality are all endogenously determined. We find the following interesting results: First, under certain conditions, economic growth exhibits cross-country convergence. Second, the relationship between income inequality and economic growth shows an inverted-U pattern. Third, an increase in the productivity of workers (both skilled and unskilled), a rise in education subsidy or an income tax cut promotes growth and reduces inequality. Finally, education subsidies and income taxes have stronger growth effects for countries farther from the technological frontier.We believe that our findings can help us understand many issues related to education, growth and inequality. In particular, our findings shed light on the relationship between technological progress and wage inequality. Many economists believe that wage inequality rises because skill-biased technological progress raises the demand for skilled workers and reduces the demand for unskilled workers. Our results show that, responding to a higher wage rate for skilled workers, the supply of skilled workers increases, and hence lowers wage inequality.
Appears in Collections:Master's Theses (Open)

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