Description: Macro-Micro Reading Group

Location: 360 Heady Hall

Contact: John Winters

Title: Endogenous Human Capital Growth and Structural Transformation

Abstract: In recent decades, Korea, followed by China, has experienced structural shifts characterized by a prolonged hump-shaped trend in manufacturing, significantly influenced by their openness to trade. In contrast, India's manufacturing sector has been sluggish and failed to exhibit a hump-shape in manufacturing, as noted in recent literature. This paper explores the factors underlying these divergent trajectories, particularly focusing on differences in human capital as a key determinant of structural transformation. By developing an endogenous growth model where human capital growth drives structural change, we analyze the asymptotic results and transitional dynamics across sectors— agriculture, manufacturing, and services. Our findings suggest that the differential growth rates of high-skilled and low-skilled labor contribute significantly to the unique patterns of industrialization and deindustrialization observed in China and India, highlighting the varying impacts of human capital on sectoral shifts in developing economies.