Human capital accumulation, heterogeneous households, and economic development

This thesis is composed of three independent papers that focus on human capital. The first two chapters are concern with the effects of human capital accumulation on household development. The theory, models, and dynamics in these two chapters' are derived by employing standard two-period overlapping generations (OLG) models. The first chapter is concern with measuring the effects of household quality investment, rearing time, and effort at explaining the development of human capital. Here it is shows that poor households are prevented from generating higher levels of human capital because of the presence of a dynamic poverty trap that nullifies household efforts to increase household human capital. Also, this essay shows that quality in child investment by middle income households is sensitive to income shocks and that poor and rich households are in a dynamic poverty trap and a balance growth path respectedly. The essay dynamics suggest that for income transfers to affect household development, these must influence parental human capital, child effort, and household child investment. The second essay focuses at the effects of child labor participation when wage price distortions exist between adult and child laborers. The model dynamics show that child labor bans that distort wage prices create conditions by where child welfare is worsen by these policies. The essay shows that when wage inequality is large child labor participation is decreased but so is the incentive of the household to invest on their child's human capital. Also, it is shown through the model dynamics that wage equality in the short-run will have the effect of increasing child labor participation which leads to household resource accumulation (physical capital). In the medium-run, these households accumulation of physical assets will enable the household to invest beyond its dynamic attractive poverty trap level and placed in a position where returns to human capital are greater than the returns to physical capital. The policy implications suggest that a poor household can be helped to overcome its poverty condition by having institutions that are able to restrict the level of wage distortions, increase educational investment, and parental human capital. The third essay build a measure of human capital demand based on the Keynesian interpretations of short run wage rigidities.