This thesis explores three important factors that have been central to the pursuit of economic development especially in case of developing countries. These are human capital, corruption and institutions. The first chapter presents an analysis of the role of corruption in determining the distribution of income and, with this, the degree of poverty and inequality. The analysis is based on an overlapping generations model in which individuals may seek to improve their productive efficiency (and hence earnings) by supplementing or substituting publicly provided services (such as education and health) with personal expenditures on human capital investment. Because of capital market imperfections, their ability to do this depends on their inherited wealth which serves as collateral for loans. Corruption is reflected in the pilfering of public funds and a reduction in public service provision, the effect of which is to reduce the earnings of those who rely on such services and to exacerbate the extent of credit rationing for these agents. The dynamic general equilibrium of the model is characterised by multiple steady states to which different income classes converge. Higher levels of corruption lead to higher levels of poverty and may result in complete polarisation between the rich and poor by eliminating the middle class. The second chapter presents an analysis of the threshold effects of human capital on economic growth. Using a sample of 126 countries (1970-2012), we estimate a dynamic threshold panel model following Hansen (1999) and Caner & Hansen (2004). Our results are twofold: first, there exists a significant threshold level of development (proxied by capital stock per capita) below which the effect of human capital on economic growth is insignificant, whereas it is positive significant above it; second, while looking into the impact of institutional quality, we find significant thresholds of interaction between institutional quality and development.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:654872 |
| Date | January 2015 |
| Creators | Ahsan, Humna |
| Publisher | University of Manchester |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | https://www.research.manchester.ac.uk/portal/en/theses/essays-on-human-capital-and-economic-development(c0f0748a-0b81-4c03-8a8a-49c925126938).html |
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