HUMAN CAPITAL AND ENDOGENOUS ECONOMIC GROWTH

IR

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This paper provides an extension of the aggregative neoclassical model of growth a la Solow (1956) with a view to elucidating important implications of investment in human capital. It is shown that the long-run (steady-state) growth rate of the economy under consideration is positively affected by a rise in saving rate or by an improvement in production technology. Furthermore, the trade-off between current consumption and its growth rate is considered and the optimal choice between them is characterized to generalize the golden rule of economic growth within the framework of the present model.

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