2. Suppose that there are two groups of people in the economy. In group j,individual i accumulates human capital according toH₂ = b(1-u) [aH₁ + (1 - a)H¹])where H is the individual i's human capital in the future period,0 < a < 1, H₂ is the individual's current human capital, andH¹ is average human capital across group j, (j = 1,2). All individuals in theeconomy choose the same u.A. What happens to incomes in groups 1 and 2 in the long run?B. What does this say about the role of human capital accumulation in incomeinequality?

Income inequality means the uneven distribution of income among the different sections of the…

2. Suppose that there are two groups of people in the economy. In group j, individual i accumulates human capital according to H = b(1-u) [aH, + (1 - a)H']) where H is the individual i's human capital in the future period, 0 < a < 1, H₂ is the individual's current human capital, and HI is average human capital across group j, (j = 1,2). All individuals in the economy choose the same u. A. What happens to incomes in groups 1 and 2 in the long run? B. What does this say about the role of human capital accumulation in income inequality?

2. Suppose that there are two groups of people in the economy. In group j, individual i accumulates human capital according to H = b(1-u) [aH, + (1 - a)H']) where H is the individual i's human capital in the future period, 0 < a < 1, H₂ is the individual's current human capital, and HI is average human capital across group j, (j = 1,2). All individuals in the economy choose the same u. A. What happens to incomes in groups 1 and 2 in the long run? B. What does this say about the role of human capital accumulation in income inequality?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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