Growth in Illyria: the role of meritocracy in the accumulation of human capital Articles uri icon

publication date

  • November 2017

start page

  • 182

end page

  • 190

volume

  • 90

International Standard Serial Number (ISSN)

  • 0165-4896

Electronic International Standard Serial Number (EISSN)

  • 1879-3118

abstract

  • In this paper we present a dynamic model of cooperative production with human capital accumulation. We assume CES preferences on consumption and leisure in each period. When agents do not care about future generations, sustained growth occurs iff the elasticity of substitution between consumption and leisure is larger or equal than one. Meritocracy always has a positive effect on output, but when the elasticity of substitution is less than one, is only a level effect. When agents care about future generations, under Cobb&-Douglas preferences in each period and some extra conditions, there is constant growth at a rate that is larger than the one when future generations do not count. For any discount rate between generations, there is a unique level of meritocracy for which efficiency is achieved.

keywords

  • Cooperative production
    Sustained growth
    Future generations
    Meritocracy