Decentralized Allocation of Human Capital and Nonlinear Growth

Abstract

Abstract:The standard two-sector growth model with physical and human capital characterizes a process of material accumulation involving simple dynamics; constant long run growth is observable when assuming conventional Cobb-Douglas production functions in both sectors. This framework is developed under a central planner scenario: it is a representative agent that chooses between consumption and capital accumulation, on one hand, and between allocating human capital to each one of the two sectors, on the other. We concentrate in this second choice and we argue that the outcome of the aggregate model is incompatible with a scenario where individual agents, acting in a market economy, are free to decide, in each time moment, how to allocate their human capital in order to produce goods or to create additional skills. Combining individual incentives, the effort of a central planner (i.e., government) to approximate the decentralized outcome to the optimal result and a discrete choice rule that governs the decisions of individual agents, we propose a growth framework able to generate a significant variety of long term dynamic results, including endogenous fluctuations.

Local Government Strategy and Foreign Direct Investment (FDI) level: Case Studies of Sleman and Kulon Progo district, Yogyakarta Special Region (DIY)

“…As regards developing a strategy specifically to direct and influence FDI flows to the two districts, results were unable to establish conclusively that either Sleman or KulonProgo district or both had one in place as. Nonetheless, findings in this research corroborate results that were established in previous research by Orlando Gomes, Seyoum and Manyak on the general determinants of FDI such as resource, market, efficiency-seeking, size of the market, skilled manpower, accessibility among other factors [3]- [5]. Asieduon the positive relationship between an investment supportive climate that is characterized by transparency, accountability, predictability and legal certainty and FDI level.…”

“…This is because some areas may not have the resource seeking, marketing seeking, efficiency-seeking, and strategic importance that investors need to establish their firms in a certain area. To that end, those locations that already have a large number of firms have a high likelihood of attracting new investments, thereby generating even larger agglomeration economies that will continue to attract future investment to such locations [5]. This is why the existence of agglomeration economies in urban areas has been blamed for increasing income disparity between rural and urban areas.…”