Aspects of Creative Capital in a Regional Economy with Time Variant Schooling

Abstract

We follow Batabyal and Beladi (2014, 2015) and theoretically study a regional economy that produces a final consumption good with physical and creative capital. However, in contrast with the approach taken in the above two papers, in our model, the means for obtaining acquired creative capital which is the number of years of schooling is not constant but growing over time. In this setting, we first derive an expression for the long run growth rate of output per raw creative capital unit. Next, we provide a numerical example to show how the above expression can be used to determine the proportion of overall regional growth that is due to increases in schooling. Finally, we discuss whether it is possible for the number of years of schooling in the region under study to grow indefinitely.