Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222833
Authors: 
Bethencourt, Carlos
Perera-Tallo, Fernando
Year of Publication: 
2020
Series/Report no.: 
ADBI Working Paper Series No. 1066
Abstract: 
To understand the weak empirical relationship between human capital and macroeconomic performance, this paper presents a model in which human capital is allocated to three activities: production, tax collection (bureaucracy), and public education. The effective tax rate is low in poor countries because tax collection requires human capital, which is scarce. Throughout the transition, the effective tax rate rises, which involves a diversion of human capital from production to bureaucracy and public education. Consequently, human capital has a weak effect on production, even when human capital is efficiently allocated. Differences in institutional quality may involve a spurious negative correlation between gross domestic product and human capital.
Subjects: 
economic growth
human capital
bureaucracy
public education
JEL: 
O42
O15
D73
I2
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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