Inequality, Human Capital Formation and the Process of Development

By Oded Galor. Social Science Research Network, 2011

165 citations recorded by the source corpus.

Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While classical economists advanced the hypothesis that inequality is beneficial for growth, the neoclassical paradigm dismissed the classical hypothesis and suggested that income distribution has limited role in the growth process. A metamorphosis in these perspectives has taken place in the past two decades. Theory and subsequent empirical evidence have demonstrated that income distribution has a significant impact on human capital formation and the development process. In early stages of industrialization, as physical capital accumulation was a prime engine of growth, inequality enhanced the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as human capital has become a main engine of growth, equality, in the presence of credit constraints, has stimulated human capital formation and growth. Moreover, unequal distribution of land has been a hurdle for economic development. While industrialists have had an incentive to support education policies that foster human capital formation, landowners, whose interests lay in the reduction of the mobility of their labor force, have favored policies that deprived the masses of education.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/8b0f1d6f19a5e7d17e1c26026c7c3ac11d8ef68f

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In Economics and Econometrics

1. D. Juif
2. Francesco Cinnirella
3. Jorg Baten
4. E. Hornung

In Sociology and Political Science

1. Francesco Cinnirella
2. Jorg Baten
3. D. Juif
4. E. Hornung

Citations in the corpus

• Landownership Concentration and the Expansion of Education (2016, background): “In order 2For an exhaustive review of the literature see Galor (2011).”
• Inequality and economic growth: the role of initial income (2018, unknown): “model of Galor and Zeira (1993). The theoretical model of Galor and Zeira predicts that the effect of inequality on transitional growth differs depending on the average wealth in the economy.”
• A story of large landowners and math skills: Inequality and human capital formation in long-run development, 1820–2000 (2014, background): “5 For an extensive literature review on how inequality affects growth, see also Galor (2011).”