Growth in Illyria: The role of meritocracy in the accumulation of human capital |
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| Institution: | 1. Universidad de Alicante, Spain;2. Universidad Carlos III de Madrid, Spain;1. MOVE, Universitat Autònoma de Barcelona, and Barcelona GSE. Departament d’Economia i d’Història Econòmica, Edifici B, 08193 Bellaterra, Spain;2. Departament d’Economia, C/ Universitat de Girona, 10; Universitat de Girona, 17003 Girona, Spain;3. Departamento de Teoría e Historia Económica, Facultad de Ciencias Económicas y Empresariales, Universidad de Málaga, Campus de El Ejido, 29071 Málaga, Spain;1. Carnegie Mellon University, Tepper Business School, Pittsburgh, PA, 15213, USA;2. University of Tsukuba, Faculty of Engineering, Information and Systems, 1-1-1 Tennodai, Tsukuba, Ibaraki 305-8573, Japan;3. Boston College, Department of Economics, Chestnut Hill, MA, 02167, USA;1. TU München, Munich, Germany;2. University of Oxford, Oxford, UK;1. Department of Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, Canada N2L 3C5;2. Department of Political Science, Washington University in Saint Louis, Campus Box 1027, One Brookings Drive, St. Louis, MO 63130-4899, United States;1. Université Paris-Dauphine, PSL Research University, CNRS, UMR [7243], Lamsade, 75016 Paris, France;2. Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University, Turkey |
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| Abstract: | In this paper we present a dynamic model of cooperative production with human capital accumulation. We assume CES preferences on consumption and leisure in each period. When agents do not care about future generations, sustained growth occurs iff the elasticity of substitution between consumption and leisure is larger or equal than one. Meritocracy always has a positive effect on output, but when the elasticity of substitution is less than one, is only a level effect. When agents care about future generations, under Cobb–Douglas preferences in each period and some extra conditions, there is constant growth at a rate that is larger than the one when future generations do not count. For any discount rate between generations, there is a unique level of meritocracy for which efficiency is achieved. |
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