am grateful to Ruth Judson, Stephanie Schmitt-Grohe, and especially to Murat Iyigun for helpful comments. Experience, Education, and Human Capital Accumulation

The ability to accumulate human capital through formal education and through a learning-by-doing process that occurs on the job affects the dynamic behavior of the human capital stock under both liquidity and non-liquidity constrained cases. When there ar alternatives to formal schooling in the accumulation of human capital, investing resources in increasing school enrollment ratios in low-income countries will have a different effect than investing resources in increased schooling in high income countries: more schooling in low income countries may even lead to a decrease in human capital in the short to intermediate term. Removal of liquidity constraints may not be sufficient to escape a development trap