Deficit, human capital and economic growth dynamics

Long-run economic growth arouses a great interest since it can shed light on the income-path of an economy and try to explain the large differences in income we observe across countries and over time. The neoclassical model has been followed by several endogenous growth models which, contrarily to the former, seem to predict that economies with similar preferences and technological level, do not necessarily tend to converge to similar per capita income levels. This paper attempts to show a possible mechanism through which macroeconomic disequilibria and inefficiencies, represented by budget deficits, may hinder human capital accumulation and therefore economic growth. Using a mixed education system, deficit is characterized as a bug agent which may end up sharply reducing the resources devoted to education and training. The paper goes a step further from the literature on deficit by introducing a rich dynamic analysis of the effects of a deficit reduction on different economic aspects. Following a simple growth model and allowing for slight changes in the law of human capital accumulation, we reach a point where deficit might sharply reduce human capital accumulation. On the other hand, a deficit reduction carried on for a long time, taking that reduction as a more efficient management of the economy, may prove useful in inducing endogenous growth. Empirical evidence for a sample of countries seems to support the theoretical assumptions in the model: (1) evidence on an inverse relationship between deficit and human capital accumulation, (2) presence of a strongly negative association between the quantity of deficit in the economy and the rate of growth. They may prove a certain role for budget deficit in economic growth- El creixement econòmic a llarg termini és un aspecte que ha desvetllat un gran interès atès que pot facilitar el coneixement del camí seguit per la renda en una economia, alhora que pot ajudar a explicar les grans diferències a nivell de renda que han existit i que encara avui romanen entre els diversos països. El model neoclàssic fou seguit per diferents models de creixement endogen que a diferència del primer semblen predir que les economies amb preferències i un nivell tecnològic semblants no han de convergir obligatòriament vers nivells de renda per càpita semblants. En aquest paper hem tractat de mostrar un possible mecanisme a través del qual els desequilibris macroeconòmics i les ineficiències, representats ambdós per la presència de dèficit, poden entorpir l¿acumulació de capital humà i per tant acabar entorpint també el creixement econòmic. Així, mitjançant un sistema educatiu mixte, el dèficit és caracteritzat com un agent molest que pot acabar exercint una important reducció dels recursos destinats a educació. L'article dóna un pas més enllà de la literatura existent pel que fa a les qüestions sobre dèficit tot i introduint una rica anàlisi dinàmica dels efectes d¿una reducció deficitària en nombrosos aspectes econòmics. Partint d'un model de creixement simple i tot i afegint-hi certs canvis, especialment concentrats en la llei d¿'cumulació de capital humà, s'aconsegueix arribar a un punt on el dèficit redueix de manera important l'acumulació de capital humà. Per altra banda, una reducció del dèficit continuada, entenent aquesta reducció com una direcció més eficient de l'economia per part dels seus responsables, podria entendre's com una manera de facilitar el creixement. L'evidència empírica per una àmplia mostra de països sembla donar suport als supostos teòrics del model: (1) evidència d'una relació inversa entre el dèficit i l'acumulació de capital; (2) presència d¿una forta associació negativa entre la quantitat de dèficit en una economia i la taxa de creixement. Ambdós resultats semblen concedir un paper destacat al dèficit en el procés de creixement econòmi

Deficit, human capital and economic growth dynamics

Long-run economic growth arouses a great interest since it can shed light on the income-path of an economy and try to explain the large differences in income we observe across countries and over time. The neoclassical model has been followed by several endogenous growth models which, contrarily to the former, seem to predict that economies with similar preferences and technological level, do not necessarily tend to converge to similar per capita income levels. This paper attempts to show a possible mechanism through which macroeconomic disequilibria and inefficiencies, represented by budget deficits, may hinder human capital accumulation and therefore economic growth. Using a mixed education system, deficit is characterized as a bug agent which may end up sharply reducing the resources devoted to education and training. The paper goes a step further from the literature on deficit by introducing a rich dynamic analysis of the effects of a deficit reduction on different economic aspects. Following a simple growth model and allowing for slight changes in the law of human capital accumulation, we reach a point where deficit might sharply reduce human capital accumulation. On the other hand, a deficit re duction carried on for a long time, taking that reduction as a more efficient management of the economy, may prove useful in inducing endogenous growth. Empirical evidence for a sample of countries seems to support the theoretical assumptions in the model: (1) evidence on an inverse relationship between deficit and human capital accumulation, (2) presence of a strongly negative association between the quantity of deficit in the economy and the rate of growth. They may prove a certain role for budget deficit in economic growth.human capital accumulation, economic growth, deficit

Tax reforms and inequality: theoretical and empirical implications

In this paper we examine the effect of tax policy on the relationship between inequality and growth in a two-sector non-scale model. With non-scale models, the longrun equilibrium growth rate is determined by technological parameters and it is independent of macroeconomic policy instruments. However, this fact does not imply that fiscal policy is unimportant for long-run economic performance. It indeed has important effects on the different levels of key economic variables such as per capita stock of capital and output. Hence, although the economy grows at the same rate across steady states, the bases for economic growth may be different. The model has three essential features. First, we explicitly model skill accumulation, second, we introduce government finance into the production function, and we introduce an income tax to mirror the fiscal events of the 1980s and 1990s in the US. The fact that the non-scale model is associated with higher order dynamics enables it to replicate the distinctly non-linear nature of inequality in the US with relative ease. The results derived in this paper attract attention to the fact that the non-scale growth model does not only fit the US data well for the long-run (Jones, 1995b) but also that it possesses unique abilities in explaining short term fluctuations of the economy. It is shown that during transition the response of the relative simulated wage to changes in the tax code is rather non-monotonic, quite in accordance to the US inequality pattern in the 1980s and early 1990s. More specifically, we have analyzed in detail the dynamics following the simulation of an isolated tax decrease and an isolated tax increase. So, after a tax decrease the skill premium follows a lower trajectory than the one it would follow without a tax decrease. Hence we are able to reduce inequality for several periods after the fiscal shock. On the contrary, following a tax increase, the evolution of the skill premium remains above the trajectory carried on by the skill premium under a situation with no tax increase. Consequently, a tax increase would imply a higher level of inequality in the economy.tax reform, inequality, human capital

Effects of differential taxation on factor accumulation and growth

In this paper we try to analyze the role of fiscal policy in fostering a higher participation of the different production factors in the human capital production sector in the long-run. Introducing a tax on physical capital and differentiating both a tax on raw labor wage and a tax on skills or human capital we also attempt to present a way to influence inequality as measured by the skill premium, thus trying to relate the increase in human capital with the decrease in income inequality. We will do that in the context of a non-scale growth model. The model here is capable to alter the shares of private factors devoted to each of the two production sectors, final output and human capital, and affect inequality in a different way according to the different tax changes. The simulation results derived in the paper show how a human capital (skills) tax cut, which could be interpreted as a reduction in progressivity, ends up increasing both the shares of labor and physical capital devoted to the production of knowledge and decreasing inequality. Moreover, a raw labor wage tax decrease, which could also be interpreted as an increase in the progressivity of the system, increases the share of labor devoted to the production of final output and increases inequality. Finally, a physical capital tax decrease reduces the share of physical capital devoted to the production of knowledge and allows for a lower inequality value. Nevertheless, none of the various types of taxes ends up changing the share of human capital in the knowledge production, which will deserve our future attention.tax reform, inequality, human capital

New insights on satisfaction prototypes for segmentation

This paper tests a conceptual segmentation using a criterion outlined by Oliver based on the satisfaction prototypes customers may follow. The empirical study was conducted with a sample of theme park visitors grouped into four satisfaction prototypes/segments. Results show the presence of important differences by groups in terms of both the effects of perceived value dimensions on satisfaction and the level of satisfaction by segment, supporting the proposed approach. The findings are valuable for a better identification of key drivers of segments' satisfaction, which will be helpful to redesign service experiences to better fit the varying preferences of modern consumers

Competences acquisition of university students: Do they match job market's needs?

This paper aims at analyzing the skills and competences acquired by students during their university studies, in order to identify the extent to which they fit into society's labor market demands

La formació competencial dels llicenciats en economia i empresa: una visió des del seu entorn professional

La recerca que es presenta té com a objectiu enfocar una de les arrels de la manca de rendiment laboral dels treballadors: la formació que han rebut, en particular aquells que han seguit una trajectòria universitària. Per dur-ho a terme s"ha valorat l"encaix entre el marc didàctic i les competències que s"exigeixen als alumnes a l"hora d"incorporar-se al mercat de treball. S"ha partit d"una enquesta a persones acabades de llicenciar de la Facultat d"Economia de la Universitat de Barcelona, a docents d"aquesta mateixa Facultat i a empresaris. A partir dels resultats obtinguts s"ha fet una anàlisi de la situació dels joves treballadors en termes de competències instrumentals, interpersonals i professionals, centrada exclusivament en la percepció dels empresaris. Segons les conclusions, una planificació de la docència més centrada en l"estudiant, des del punt de vista de la seva formació integral, pot contribuir de forma essencial a incrementar la seva futura productivitat laboral

The recruit requirements of recent graduates: Approaching the existing mismatch

This paper explores quality perception and expectations in higher education considering 30 competences grouped into three standard sets: instrumental, interpersonal, and professional. Based on the SERVQUAL research model, the authors propose a four-gaps model to compare employers' and graduates' perceptions of the competences required by the labour market and the level of skills achieved after graduation, and examines the existence of discrepancies between them. Our model analyses the uneasy feeling perceived in the labour market due to the existing mismatch between the skills developed by students at university and those that the labour market demands using a higher learning institution. Data were collected by means of a survey conducted among recent graduates in economics, and from managers in companies where those graduates were working. Our findings reveal that graduates are not being taught the specific knowledge that would apparently be useful for successful integration into the labour market on leaving university (gap A). More importantly, graduates seem to lack self-esteem and confidence in their own abilities and knowledge (gap B). In our opinion, this research offers an important contribution to the understanding of skill gaps and contributes to empirical knowledge by identifying the aspects where the main discrepancies lie

Formació universitària i mercat laboral: dues realitats prou confluents?

This paper sets out the research undertaken in the project REDICE1001-01, funded by the ICE at the Universitat de Barcelona. It shows the frame work, the goals and methodology used, as well as some preliminary results. This research is intended to analyze what we think it could be one of the roots causing the poor performance of workers. In order to do so we go back to one of its likely origins: training and acquisition of working abilities during university education. Following our approach a better teacher planning focused on the student and paying special attention to comprehensive training, may essentially contribute to the increase of the future labor productivity level of current students

Toma de decisiones en estudiantes de Grado de Ciencia Política y Administración [Decision-making in Political Science and Administration degree students]

La toma de decisiones es una de las competencias principales de los graduados en Ciencia Política y de la Administración. Analizamos una encuesta realizada a estudiantes durante los cursos 2006-2007 al 2012-2013, para la asignatura de Estructura Social de carácter obligatorio y equivalente a 6 créditos ECTS. Aplicamos el análisis multivariante para reducir la dimensionalidad de las variables estudiadas. Se construyen cuatro factores y un modelo de regresión logístico multinomial. Los resultados obtenidos indican que tres de los cuatro factores influyen positivamente a la hora de incrementar la probabilidad de pasar de una capacidad de Toma de decisiones de nivel nulo a un nivel elevado, sólo dos si se pasa a un nivel intermedio, y únicamente uno cuando se pasa a un nivel bajo. [Decision making is one of the main competencies graduates in Political Science and Administration should achieve. We analyzed a survey conducted among students from the 2006-2007 to the 2012-2013 academic courses, for the subject Social Structure, a compulsory subject with 6 ECTS credits. We used a multivariate analysis to reduce the dimensionality of the variables. Four factors were retained and then we applied a multinomial logistic regression model. The results indicate that (1) three of the factors have a positive influence on the probability to move from a null to a large decision making ability, and (2) the higher the decision making capacity, the more factors end up exerting a positive influence.