Working Paper #2017-034
How inequality hurts growth: Revisiting the Galor-Zeira model through a Korean case
This paper aims to show that the level of inequality increases via the
human capital channel with credit market imperfections generating
negative effects on economic growth. We expand the model presented by
Galor and Zeira (1993) to represent the fact that the economy benefits
from endogenous technological progress and that the government provides
financial aid to reduce the financial hurdles for human capital
accumulation. We use Korean data from 1998 to 2008 to empirically
confirm that education plays a significant role in the divergence of
household wealth over time and that the government's financial aid
package in the form of the new student loans programme positively
influences equality and short-run economic growth by promoting the
number of skilled workers.
Keywords Human Capital, Economic Growth, Inequality
- JEL codes
-
- I24
- I25
- O15
Cite this as
APA 7th ed.Jun, B., Kaltenberg, M., & Hwang, W.-S. (2017). How inequality hurts growth: Revisiting the Galor-Zeira model through a Korean case (UNU-MERIT Working Paper No. 2017-034). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=7298