Journals Proceedings

Abstract

We present an over lapping generation model of an economy that consists of three classes of workers. Agents might invest in education or capital. As people are more educated, their population growth rate is lower. The poorest class cannot borrow in order to invest in education or capital and its population is growing faster. As capital grows, educated agents can be mobilized into a state of firm owners. We show that under such conditions, while the wage per worker of the poorest class can increase, income distribution worsens as the economy grows.