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Human-capital formation: The importance of endogenous longevity
Titus J Galama1,2,3, Hans van Kippersluis3,4
1University of Southern California, Center for Economic and Social Research (CESR) and Department of Economics, USA.
Abstract:
We present a theory of human capital, with health, skill, and longevity, endogenously determined. Using comparative dynamic analyses and a calibrated version of the theory, we uncover an important economic mechanism driving human-capital formation: whether individuals can influence their longevity. When they can, additional resources are invested in human capital. When they cannot, additional resources are used for consumption and leisure, i.e., "non-productively". These findings point to the potential importance of endogenous longevity as an economic mechanism driving human-capital formation, and, by extension, human capital-based economic growth.
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