American Economic Review Vol. 95 No. 5 2005
Human Capital Formation, Life Expectancy, and the Process of Development
Abstract
We provide a unified theory of the transition in income, life expectancy, education, and population size from a nondeveloped environment to sustained growth. Individuals optimally trade off the time cost of education with its lifetime returns. Initially, low longevity implies a prohibitive cost for human capital formation for most individuals. A positive feedback loop between human capital and increasing longevity, triggered by endogenous skill-biased technological progress, eventually provides sufficient returns for widespread education. The transition is not based on scale effects and induces population growth despite unchanged fertility. A simulation illustrates that the dynamics fit historical data patterns.
- DOI
- 10.1257/000282805775014380
- Volume
- 95
- Issue
- 5
- Pages
- 1653-1672
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex