Let ht denote human capital of generation t (i.e., human capital of people born in year t). Suppose that human capital accumulates as a result of education spending, denoted by x and measured in 1,000 US dollars. If x = 30, the total spending is 30,000 US dollars and human capital of this individual is equal to ht = 2√x . Suppose that every individual has the same human capital, and output per individual is yt = Aht , where A > 0 is a fixed technology parameter. Find the (long-run) growth rate of yt . Show all your work, and interpret your results.
Let ht denote human capital of generation t (i.e., human capital of people born in year t). Suppose that human capital accumulates as a result of education spending, denoted by x and measured in 1,000 US dollars. If x = 30, the total spending is 30,000 US dollars and human capital of this individual is equal to ht = 2√x . Suppose that every individual has the same human capital, and output per individual is yt = Aht , where A > 0 is a fixed technology parameter. Find the (long-run) growth rate of yt . Show all your work, and interpret your results.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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This is an extremely simple human capital accumulation problem. Let ht denote human capital of generation t (i.e., human capital of people born in year t). Suppose that human capital accumulates as a result of education spending, denoted by x and measured in 1,000 US dollars. If x = 30, the total spending is 30,000 US dollars and human capital of this individual is equal to ht = 2√x . Suppose that every individual has the same human capital, and output per individual is yt = Aht , where A > 0 is a fixed technology parameter. Find the (long-run) growth rate of yt . Show all your work, and interpret your results.
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