Externalities and Dynamics in Models of "Learning or Doing"

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Abstract
This paper analyzes the dynamics of general equilibrium models with ex- ternalities in human capital accumulation and measures analytically the impact of endowment shocks on the levels of output in the short- and the long-run. For some parameter values, self-fullfilling expectations and exter- nalities generate a continuum of equilibria. In general, positive endowment shocks can be followed by higher or lower growth rates. A simple condition is established for a positive impact of physical capital on the level of output in the long-term. Under the same condition which is satisfied for plausible values of the structural parameters, lump-sum taxa- tion is less efficient than some capital income taxation.
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