The Effect of Better Information on Growth and Welfare.

We develop an OLG economy with accumulation in human capital. Heterogenity among individuals in each generation results mainly from the (random) innate ability assigned to each individual. We analyze how better information, which allows better 'screening' during the 'youth' period when the individual human capital is being formed, affects welfare and the accumulation process of human capital in each generation. Our analysis highlights the critical role played by the degree of risk aversion in the economy and by the availability of a risk sharing market.