Perspectives on human capital : economic growth, occupational choice and intergenerational mobility

Abstract: This dissertation consists of three essays, taking different perspectives on human capital. The first essay looks at human capital from a growth perspective. Essays two and three focuses on the individual’s occupational decision and its relation to family background.The first essay attempts to capture the effects on long run economic growth and transitional dynamics of the interaction between human capital and R&D. We do this by allowing for endogenous human capital accumulation in an economy where the number of products and technologies expands because profit maximizing entrepreneurs do R&D. We find that, in the absence of scale effects, long run growth is determined by the economy’s capacity to accumulate human capital. A relative lack of R&D capital causes the economy to grow slowly during its transition to the steady state, while a relative abundance of R&D capital gives high growth rates during transition.In the second essay, the classical Roy-model of selection on the labor market is extended in order to analyze intergenerational mobility. This is done through the introduction of ability uncertainty that is linked to family background. In contrast to to additional human capital models of intergenerational mobility, this mechanism rather than differences in access to capital markets links occupational oucomes of offspring to parents. We study the effects of income redistribution on mobility and talent allocation. It is found that redistribution has implications for intergenerational mobility and talent allocation through its influence on individual occupational choices. However, we conclude that the presence of a trade-off between redistribution and intergenerational mobility depends on the extent of similarity of occupations with regard to ability sensitivity and wage rates, and on the degree of individual risk aversion. Whether redistribution occurs only within an occupation or simultaneously within and across occupations is also inportant for the implicatons for mobility and talent allocation.In essay three, a model of occupational choice and human capital investment is developmed and tested. The model allows family background to influence occupational choice through access to economic resources, differences in costs of schooling, and ability uncertainty linked to background similar to that discussed in essay two. It is predicted that life time utility of children from less well-off background is more sensitive to economic incentives when risk aversion is strong. The model also predicts that people are more sensitive to economic incentives when considering occupations distant from their parent occuations. The implications of the theoretical model are tested and largely confirmed on Swedish data using a mixed multinominal logit framework which explicitly accounts for unobserved ability heterogeneity.