Sectoral Shift, Wealth Distribution, and Development

There are two phenomena widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of its population. The question is why some economies have succeeded in such structural change, but others do not. In order to examine the question, an OLG model that explicitly takes into account the sectoral shift and human capital accumulation as sources of development is constructed. It is shown that, for a successful structural change, an economy must start with a wealth distribution that gives rise to an adequate size of 'middle class'. Once the economy initiates the 'take-off', the sectoral shift and human capital growth continue until it reaches the steady state with high income and equal distribution. However, when the productivity of the traditional sector is low, irrespective of the initial distribution and the productivity of the modern sector, it fails in the sectoral shift and ends up in one of steady states with low income and high inequality. Thus, sufficient productivity of the traditional sector is a prerequisite for development

Government and human capital in a model of development through modernization and specialization

Economic development is associated with the shift of production from the traditional sector (e.g. traditional agriculture and the urban informal sector) to the modern sector (e.g. modern manufacturing and commercial agriculture). Human capital accumulation, particularly, education and job training of skilled workers, is a crucial factor in the modernization of an economy. Several institutions such as the protection of property rights and the strength of the rule of law also are considered essential. Thus, the government has an important role as the main provider of 'institution-maintaining' services, although it often faces a difficulty in providing adequate amounts of the services due to costly hiring of educated officers and tax avoidance. This paper analyzes interactions among taxation, the provision of the public services, human capital accumulation, and modernization, based on a dynamic dual economy model, which draws on the Becker and Murphy (1992) model of skill and task specialization, and examines conditions for successful development. Distributions of political power and wealth as well as sectoral productivities and the cost of education affect the outcome qualitatively. In particular, the socially desirable distribution of political power is such that educated (uneducated) individuals should have dominant power at an early (late) stage of development. Further, it is shown that several novel or overlooked inefficiencies arise naturally from realistic features of the model and appropriate redistribution can correct the inefficiencies except at a fairly early stage of development.dual economy; government; human capital; inequality; overeducation; redistribution; specialization

Sectoral Shift, Wealth Distribution, and Development

There are two phenomena widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of its population. The question is why some economies have succeeded in such structural change, but others do not. In order to examine the question, an OLG model that explicitly takes into account the sectoral shift and human capital accumulation as sources of development is constructed. It is shown that, for a successful structural change, an economy must start with a wealth distribution that gives rise to an adequate size of 'middle class'. Once the economy initiates the 'take-off', the sectoral shift and human capital growth continue until it reaches the steady state with high income and equal distribution. However, when the productivity of the traditional sector is low, irrespective of the initial distribution and the productivity of the modern sector, it fails in the sectoral shift and ends up in one of steady states with low income and high inequality. Thus, sufficient productivity of the traditional sector is a prerequisite for development.Human capital; Sectoral shift; Structural change; Wealth distribution

Sectoral Shift, Wealth Distribution, and Development

There are two phenomena widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of its population. The question is why some economies have succeeded in such ’structural change’, but others do not. In order to examine the question, an overlapping generations model that explicitly takes into account the sectoral change and human capital accumulation as sources of development is constructed and analyzed.Economic development; Human capital; Sectoral shift; Wealth distribution

Education, Signaling, and Wage Inequality in a Dynamic Economy

Many empirical works suggest that education has a positive effect on earnings not only because it raises human capital but also because it functions as a signal when employers have incomplete information on employees' skills. The signaling role could have important consequences on the dynamics of education, wages, and wage distribution when there exist intergenerational linkages in educational decisions. This paper examines the dynamic effects in an economy where education has the dual roles and some fraction of individuals is credit constrained from taking education. In particular, it investigates how the number of educated individuals, the importance of the signaling value of education, and the wage inequality between educated and uneducated workers change over time in such economy, and compares the dynamics with those when education does not function as a signal. It also examines whether the signaling role leads to higher aggregate consumption or not in the long run.Human capital; Education; Signaling; Statistical discrimination; Credit constraint

Nonlinear polarization evolution using time-dependent density functional theory

We propose a theoretical and computational approach to investigate temporal behavior of a nonlinear polarization in perturbative regime induced by an intense and ultrashort pulsed electric field. First-principles time-dependent density functional theory is employed to describe the electron dynamics. Temporal evolution of third-order nonlinear polarization is extracted from a few calculations of electron dynamics induced by pulsed electric fields with the same time profile but different amplitudes. We discuss characteristic features of the nonlinear polarization evolution as well as an extraction of nonlinear susceptibilities and time delays by fitting the polarization. We also carry out a decomposition of temporal and spatial changes of the electron density in power series with respect to the field amplitude. It helps to get insight into the origin of the nonlinear polarization in atomic scale.Comment: 11 pages, 9 figure