Abstract

In an OLG model with credit rationing, human capital accumulation is subject to two different kinds of externalities: in addition to the common externality regarding the social benefits of education not considered by individuals, there is a positional externality because each agent makes his choices knowing that the remuneration of the time spent at work will be determined on the basis of his relative rather than absolute level of human capital. The numerical simulations of the model, characterized by specific assumptions about agents' behaviour and the structure of factor compensations, show a positive relationship between social mobility, meritocracy and economic growth.