Eftimoski, Dimitar (2025) Too Much of a Good Thing? Endogenous Human Capital and Nonlinear Growth Beyond the Middle-Income Trap. Working Paper. SSRN.
Full text not available from this repository.Abstract
This paper develops a nonlinear growth model to examine how human capital shapes long-run growth and convergence, with particular attention to the dynamics of the middle-income trap. Human capital is modelled as a determinant of absorptive capacity, enhancing economies' ability to adopt and utilize advanced technologies. While retaining the core logic of the neoclassical framework, the model relaxes the constant-elasticity assumption, allowing the productivity effect of education to vary endogenously with its level. This captures both saturation and composition effects that shape convergence trajectories and govern the transition from imitation to innovation. Empirically, the analysis combines a production-function and a macro-Mincerian specification and employs a rolling-threshold estimation strategy that mitigates endogeneity in both covariates and threshold variables. The results show that human capital promotes growth at low levels, consistent with technology-driven catch-up, but its marginal effect declines and may even turn negative beyond a critical schooling threshold. Higher initial education also amplifies the responsiveness of growth to initial income, implying that convergence may slow or even reverse at middle-income stages. This reconciles conflicting evidence in the growth literature and suggests that the middle-income trap arises when educational expansion is not accompanied by improvements in technological adaptability and institutional capacity.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Subjects: | Scientific Fields (Frascati) > Social Sciences > Economics and Business |
| Divisions: | Faculty of Law |
| Depositing User: | PhD Dimitar Eftimoski |
| Date Deposited: | 20 Jan 2026 08:43 |
| Last Modified: | 20 Jan 2026 08:43 |
| URI: | https://eprints.uklo.edu.mk/id/eprint/11313 |
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