Externalities and Dynamics in Models of "Learning or Doing."

This paper analyzes the dynamics of general equilibrium models with externalities in human capital accumulation which extends that of Uzawa-Lucas. Multiple balanced growth paths, with different growth rates, and a continuum of equilibria (with a unique balanced growth path) may exist. In general, endowment shocks can be followed by higher or lower growth rates. A simple necessary and sufficient condition which depends only on the physical production technology, is established for a positive impact of physical capital on productivity growth. Under the same condition, a sudden removal of capital income taxation lowers welfare. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.