Optimal Investment in Human Capital under Conditions of Nonstable Population

The paper analyses optimal investment in physical and human capital when the (exogenous) rate of population growth changes. The growth model describes a closed economy with overlapping generations and homogeneous human capital. The optimal growth path is characterized by two groups of optimality con...

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Bibliographic Details
Published in:The Journal of human resources 1989-07, Vol.24 (3), p.414-432
Main Author: van Imhoff, Evert
Format: Article
Language:English
Subjects:
Capital investments
Demography
Economic growth models
Economic growth rate
Economic theory
Growth models
Human capital
Human resources
Labor force
Population
Population growth
Population growth rate
Structural capital
Workforce
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Summary:The paper analyses optimal investment in physical and human capital when the (exogenous) rate of population growth changes. The growth model describes a closed economy with overlapping generations and homogeneous human capital. The optimal growth path is characterized by two groups of optimality conditions: a Generalized Golden Rule for optimal investment in physical capital; and a continuum of Golden Rules of Education, corresponding to the continuum of active generations. These conditions for optimal investment in human capital can be interpreted in terms of the familiar equality of discounted costs and returns. The model is illustrated with a numerical simulation.
ISSN:0022-166X
1548-8004
DOI:10.2307/145821