Optimal investment in immobile human capital in an economic and monetary union
by Michal Konopczynski
International Journal of Computational Economics and Econometrics (IJCEE), Vol. 1, No. 2, 2009

Abstract: We analyse the optimal accumulation of physical and human capital in a small economy in monetary union. We derive the modified golden rule, which states that the optimal rates of investment in physical and human capital depend upon the natural rate of growth and the real interest rate. If they are equal, there exist infinitely many optimal pairs of investment rates. However, if they differ, the golden rule recommends one of two extreme solutions. Optimal investment rates are always linked together by a very simple linear equation (the line H). The economy should always stay on the line H, and move along this line, either up or down, in response to changes in exogenous parameters. These results are illustrated with numerical experiments, based on realistic values of exogenous parameters. Simulations suggest that current levels of investment in human capital in small European countries are way too low.

Online publication date: Tue, 17-Nov-2009

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Computational Economics and Econometrics (IJCEE):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com