Abstract
This paper extends the Grossman human capital model by including endogenous demand for knowledge capital. Human capital investment behavior is modeled from the start of a person's life rather than only after she has acquired the optimal stock of knowledge capital or reached the mandatory schooling age. The general condition for the optimal knowledge capital stock and the optimal health capital stock is derived, and the conditions for an individual's choices of interior and corner solutions for learning time that increases knowledge capital stock are presented. The extended Grossman human capital model provides a theoretical basis for explaining and predicting the effects of economic conditions on educational attainment from a distinctive perspective based on the joint determination of health capital and knowledge capital.
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