[2] In particular, Galor and Zeira have argued that since credit markets are imperfect, inequality has an enduring impact on human capital formation, the level of income per capita, and the growth process.
In particular, the model predicts that inequality have an adverse effect on human capital formation and economic growth in all but the very poor economies.
[6] Roland Benabou's finds that the growth process of Korea and the Philippines "are broadly consistent with the credit-constrained human-capital accumulation hypothesis.
"[7] In addition, a recent study by Andrew Berg and Jonathan Ostry[8] suggests that inequality seems to affect growth through human capital accumulation and fertility channels.
The society is segmented into two dynasties (due to the fixed cost of education): Inequality affects development: Government policy can improve the long-run equilibrium (in non-poor economy) by: The Review of Economic Studies named the Galor-Zeira paper ("Income Distribution and Macroeconomics") among the 11 most path-breaking papers published in The Review of Economic Studies in the past 60 years.