Globalisation, Poverty and Inequality (Development Centre by Organization for Economic Co-operation and Development

By Organization for Economic Co-operation and Development

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9. Results are obviously reversed if one allows instead for migration of unskilled labour. 10. Building mainly on the insights of the endogenous growth literature in closed economies, important work has also developed dynamic trade models to explore the links between international trade, human capital accumulation and economic growth. See Lucas (1988 and1993); Rivera-Batiz and Romer (1991); Stokey (1991a and b); Young (1991); and Grossman and Helpman (1991). In these models, the 38 engine of growth comes from some externality generated by the process of human capital accumulation, either directly in the education sector itself or indirectly through sectoral or country-wide learning by doing.

To the extent that the country’s initial political situation is oligarchic and the elite anticipates, at least partially, the implications of educational policies for the future structure of political power, an obvious question comes to mind. Are the incentives for this elite to promote and subsidise the education of the poorest the same as before? That is, do the benefits it derives from the externalities emanating from 34 education or the strong complementarity between skilled labour and capital stay the same?

What are the incentives for that group to subsidise or publicly provide education? A first one, suggested in Bourguignon and Verdier (2000a), following part of the endogenous growth literature, is the idea that human capital accumulation generates externalities at the level of the aggregate economy, some or all of which can be captured by the elite. In that case, expanding the size of the educated labour force increases the return on the elite’s assets beyond what market forces can provide. Another incentive emerges if skilled labour and physical capital are complements in the production process.

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