The Theory of Investment in Schooling

Abstract

The aim of this article is to bring an additional source of countries heterogeneity in the growth literature focused on knowledge accumulation. We find that, the observed heterogeneity in development levels among countries come mostly from income heterogeneities among families as the resulting effect of supplementary investment in schooling provided by parents since the high school. The productivity generated induces the firms’ profits increase through technology better comprehension, thus increases the country’s economic growth. Therefore, embodied knowledge is a process composed of two steps which are: schooling investment or ex-ante knowledge, first and human capital or ex-post knowledge after, thus are crucial unemployment reduction mechanisms.