Hierarchical Human Capital and Economic Growth: Theory and Evidence

We embed an N-level human-capital hierarchy in a growth model and demonstrate that the hierarchical structure generates an optimal investment program with phases of stock depletion and expansion in the stocks of the various levels of human capital. We then take the implications of the model to data from a diverse sample of countries and find patterns of stock expansion and contraction consistent with the theoretical model. We also illustrate how allowing for hierarchical human-capital formation might contribute to the empirical growth literature.