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Sector-Specific Externalities and Status Preferences in the Uzawa-Lucas Model

12 Pages Posted: 6 Aug 2008  

Koichi Kawamoto

affiliation not provided to SSRN

Date Written: 2006-09-07

Abstract

This paper shows that introducing preferences for social status based on human capital holdings modifies the finding of Gómez (2004) that sector-specific externalities associated with human capital in the goods sector do not violate the optimality of the competitive economy in the Uzawa-Lucas model. The effect of an increase in the degree of sector-specific externalities is qualitatively the same as that of an increase in the strength of the desire for status. Hence, paradoxically, a greater degree of sector-specific externalities makes human capital accumulation more excessive from the social point of view.

JEL Classification: E62, H21, O41

Suggested Citation

Kawamoto, Koichi, Sector-Specific Externalities and Status Preferences in the Uzawa-Lucas Model (2006-09-07). Japanese Economic Review, Vol. 59, Issue 3, pp. 312-323, September 2008. Available at SSRN: https://ssrn.com/abstract=1206302 or http://dx.doi.org/10.1111/j.1468-5876.2008.00419.x

Koichi Kawamoto (Contact Author)

affiliation not provided to SSRN

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