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THE CONFLATING EFFECTS OF EDUCATION AND FINANCIAL COMPETITION IN AN OVERLAPPING GENERATIONS-GROWTH MODEL WITH NELSON–PHELPS HUMAN CAPITAL

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  • Manuscript received 23.9.11; final version received 9.3.12.

Abstract

The Nelson–Phelps concept of human capital, determining the speed at which a new technology may be implemented, is considered within an AK, overlapping-generations model, where finance firms act as local monopolies in the loan market but as monopsonistic price-takers in the deposit market. Households also vote for taxes earmarked for public investment in education and, thence, the subsequent level of human capital. A concentrated financial market structure, despite directly lowering economic growth, may indirectly raise it through provoking a political economy response of voting for higher taxes for greater levels of Nelson–Phelps human capital.

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