From Physical to Human Capital Accumulation: Inequality and the Process of Development

2004/12/01 by Oded Galor, Omer Moav · 6 citations
Social Sciences · Economics, Econometrics and Finance · Mathematics · #Income, Poverty, and Inequality #Economic Growth and Productivity #Fiscal Policy and Economic Growth #Economics #Physical capital #Human capital #Inequality #Capital deepening #Process (computing) #Capital formation #Capital (architecture) #Economic system #Financial capital #Market economy #Mathematics

paper · doi:10.1111/0034-6527.00312

openalex publication_date 2004/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30

Abstract

This paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development. It argues that the positive impact of inequality on the growth process was reversed in this process. In early stages of the Industrial Revolution, when physical capital accumulation was the prime source of growth, inequality stimulated development by channelling resources towards individuals with a higher propensity to save. As human capital emerged as a growth engine, equality alleviated adverse effects of credit constraints on human capital accumulation, stimulating the growth process.

Citations

• Inequality and Growth in a Panel of Countries
• Multiple regimes and cross‐country growth behaviour
• A Theory of Trickle-Down Growth and Development
• Growth, income distribution, and democracy: What the data say
• The Origins of Technology-Skill Complementarity
• Economic Development with Unlimited Supplies of Labour
• Do the Rich Save More?

Cited by

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• Rising top incomes do not raise the tide
• Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond
• State Capacity and Economic Development: Present and Past
• Nonlinearity in the financial development–income inequality nexus
• Economic growth [wikipedia]