Abstract:
This thesis develops a model to analyze the growth and ¯scal policy implica-
tions in a model in which there exists an externality through the aggregate
human capital. We endogenize the individual rate of time preferences and
our results show that individuals that are more patient invest more in human
capital. The model is solved along the balanced growth path. There exist
a low growth equilibrium in which agents put less weight on human capital
in the utility function. Whereas there exist multiple growth paths if agents
value human capital more. Further, we perform a stability analysis. The
results of the model ¯nd that human capital generates positive externalities.
Our analysis implies that in the presence of these externalities there is lower
optimal government taxation.
