lim E (°t+ι) = 0:5
t!+1
T Ihehigherthedegreecfinheritabi lityof°, themorevol<ati ethedegree
Cftezhnical inherency from ageneraticn tothecther are greater. T he
maximum csci Ilaticn is (1 j ½). T herefCre the Cwer ½, the wider the
interge∏eιaticral csci IIaticns in thedegreecfteChnical inet ciency that
is thevariance cf°
Var (°,) = ⅛ hi(1 j ½) ".½)'" " + (½)2<t-2) +
::: + 1)+
lim Var (°,) = ɪ (1
,!1 12
½)2
P references arehcmcgenecus amcngthepcpuIaticn. T heindividuaIutiI-
ity functicn is the fcIIcwing:
(2)
(° _ r(7) b(1~7)
u =c,+1b,+1
wherec,+ 1 represents individuaIccnsumpticn in theseccnd pericd cfIifeand
b,+1 represents theIeveIcfbequests Iefttceach agent’s scn.
In the... rstperiod cf life agents Chccse Whethertcsave the whole inher-
itance, crtc invest it (at Ieastin part) in human capitaI. The investment
is indivisible and equal toh. T herefcre agents face a binary (“all or ncth-
ing”) chcice.A ssumingthatagents cannctbcrrcwtc.nance educaticn, pccr
agents, with bt < h, are nct abe to undertake any kind cf human capital
investment.
Education makes agents morebt dent and moreprcductiVe. T heseccnd-
pericd level cf inet dency (°o) 1, is lower for agents who have undertaken
investment in educaticn, while(it remains the cne assigned by N ature fcr
o ° fcr h = 0
unskilled agents: °o = ° jh = .
°j 1 ° j h for h = h
Intheseccndpericdcflifeagentschccsewhethertcbeccmeentrepreneurs
crtc supply theircwn endcwmentcflabcur. The marginalprcductivity cf
ski led workers, exogenous and constant is equal tow + ±h, and itis higher
than thatcfunskilledwcrkers.: L abcuris remuneratedacccrdingtcmarginal
prcductivity. T herefcre thewagerate atan excgencus and ccnstantrate. In
1 “c” stands fcr“cld”.
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