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What is the nature of human capital?
What is the model saying?
As with previous computations, crux of the model is the equation you derive in Step 3: that steady state output is directly proportional to the measure of labour input, h
Prediction with respect to output per worker in the steady state. Why is this prediction lousy?
A, g, n are not the same for all countries
Problem with measuring human capital (Barro & Lee measure)
The quality of schooling differs between countries (Teachers, Textbooks, Students)
There are externalities to human capital
What is the effect of an exogenous shift in income?
How does income affect health?
More income → improved nutrition; better access to safe water and sanitation; better-quality health care
How does health affect income?
Through a number of mechanisms:
Labour productivity
Education
Savings
Demography
