Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Assume representative agent's utility function takes form:
e(1- s(t))h(t)dt
max
where 0 < s(t) < 1 denotes schooling time. h(t) is human capital level in t. Human
capital accumulation technology is given as:
hit) = óh(t) H(t)s(t) - ôh(t)
1
where o is a constant, 0 <7< 1, 6 is human capital depreciation rate, and H(t) is the
average human capital stock in the economy. Derive the growth rate of human capital
and s" on the balanced growth path.
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