A conceptual model for growth by Capital-Education investments

Abstract

Economic growth depends on capital investments and on investments in education and innovation. The model introduced here will specifiy aggregate output as determined by aggregate supply of capital and education investment. After formulating and analysing such a model in section 2 we will consider the effectiveness of education for the growth of the National Product. It turns out that small changes of the quality of education has a considerable impact on economic growth. Secondly we consider the influence of chaotic fluctuations of capital investments caused by hype-cycles or erratic policies. In section 3 we introduce a continuous control on education investments depending on consumption. In this 3-dimensional macro-economic model it turns out that a tipping point exists where increase of consumption affecting the amount of education and innovation leads to decline of economic growth.