Technological change causes three consequences: it guarantees economic growth, it requires employees to acquire more skills and human capital, and it increases inequality if employees are not capable adapting to new technologies. The second consequence makes it almost necessary for employees to learn during their whole working life, thereby accelerating technological change. Accordingly, the OECD (the Organization for Economic Co-operation and Development) and many governments supports the idea of lifelong learning, but it remains unclear how to finance the education of adult students who are working efficiently. In this paper, we use an overlapping generation model with human capital accumulation and inequality to derive a mechanism which reduces income inequality and provides an incentive for all adults to invest more in education. As a consequence, the growth rate of per capita income will increase and income inequality will be reduced.
adult learning overlapping generations human capital progressive taxation income inequality