Service Sector, Human Capital Accumulation And Exogenous Growth Model

Abstract

The present paper analyses an external growth model in a two sector economy. The model is constructed with commodity and service sector, with the assumption that the income earned from commodity production is used for consumption and investment purposes. Investment is used here for physical capital accumulation, whereas the service good is totally consumed.  The model is formed in such a manner that only skilled labours are employed in the service sector.

In this paper, we have shown that there exists a unique steady state growth path of human capital accumulation which is determined completely by external parameters. The growth rate of consumption is determined by the efficiency of technology parameter of commodity production function and commodity output elasticity of labour.