May 1996

The Accumulation of Human Capital: Alternative Methods and Why They Matter

Murat F. Iyigun and Ann L. Owen


We show how the ability to accumulate human capital through formal education and through a learning-by-doing process that occurs on the job affects the dynamic behavior of the human capital stock under a liquidity-constrained and a non-constrained case. When there are alternatives to formal schooling in the accumulation of human capital, investing resources in increasing school enrollment rates in low-income countries may not be the most efficient means of increasing the human capital stock. In addition, removal of liquidity constraints may not be sufficient to escape a development trap.

PDF: Full Paper

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Last Update: February 19, 2021