Human capital externality and chaotic equilibrium dynamics
Resource
Mathematical and Computer Modelling of Dynamical Systems, 14(6), 571-586
Journal
Mathematical and Computer Modelling of Dynamical Systems
Journal Volume
14
Journal Issue
6
Pages
571-586
Date Issued
2008
Author(s)
Abstract
This study develops a two-period overlapping generations model in which adults undertake educational investment decisions on behalf of young agents. In addition to educational investment, we argue that the accumulation of human capital is also dependent upon the externality from average human capital within the economy. In a departure from the previous literature in this area, we assume that there is a reduction in the overall productivity of human capital accumulation brought about by human capital externality, and show that complicated dynamics will emerge under this circumstance. In addition to displaying the chaotic dynamics in the sense of Li and Yorke, we also verify the existence of Devaney's chaos and Smale's chaos.
SDGs
Type
journal article
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