Human capital and the quality of education in a poverty trap model : OPHI working paper no. 30

This paper presents a model of a poverty trap that is caused by an unequal initial income and human capital distribution, and differences in the quality of education between children from the more and less advantaged social sectors. Under certain conditions, the economy converges to a situation with three stable and simultaneous equilibria, two of which constitute poverty traps, lowering the economy’s current and steady-state aggregate output level as well as its growth rate. The model suggests that a policy oriented to equalizing the quality of education would, in the long run, have potential in reducing initial inequalities.Copyright © Oxford Poverty & Human Development Initiative 2009. This publication is copyright, however it may be reproduced without fee for teaching or non-profit purposes, but not for resale. Formal permission is required for all such uses, and will normally be granted immediately. For copying in any other circumstances, or for re-use in other publications, or for translation or adaptation, prior written permission must be obtained from OPHI and may be subject to a fee