We develop a tractable two-sector endogenous growth model in which heterogeneous entrepreneurs face borrowing constraints and the government collects tax to fund public eduction. This model is isomorphic to a Uzawa-Lucas model and there exists a balanced-growth path equilibrium in which the...

This paper studies the effects of fiscal policy on growth in an environment where heterogeneous entrepreneurs face collateral borrowing constraints and human capital accumulation is influenced by public spending. In such an environment, the paper first shows that positive public spending on...