Multiple Equilibria in a Modified Solow-Swan Model

In this paper, we study the effect of education on economic growth. In particular, we want to show that education can cause some nonlinearities in the human capital accumulation process. These nonlinearities may affect the economic growth path. In the first part of this work, we will provide a model of human capital accumulation. According to this model, a non constant human capital obsolescence rate can cause non constant returns to scale of education to produce human capital. Subsequently - to explain why, under some conditions, multiple equilibria can appear - we will modify a traditional Solow-Swan model by introducing our theoretical contribution. Furthermore, we will calibrate our model to see if given reasonable values of parameters, it is possible to generate multiple steady states. In the second part of this work, we will conduct some econometric analyses to prove that the returns to scale in producing human capital are non constant. Finally, in the last part, we will discuss the main implications of our paper