Discrimination: A Threat to Economic Growth. Deriving a Neoclassical Growth Model with Human Capital Barriers

Sammanfattning: This paper was set out to examine how discrimination lower incentives to attain human capital throughout different societal sectors and, thus, how human capital barriers affect economic growth. We aim to derive a generalized theoretical framework that is applicable to any group facing discrimination. Our secondary purpose is to apply the generalized theoretical framework to women and men in Sweden from the period 1965 to 2015 in order to concretize the model and test it in practice. A general neoclassical growth model is constructed, which includes discrimination causing barriers to human capital accumulation. The barriers to human capital attainment affect the discriminated groups’ decision to acquire human capital. The discrimination consists of occupation-specific wage differences, wage differences when holding the same level of education, discrimination in the schooling sector, over-education, and socioeconomic differences. Relevant data on wages, occupation, and education are collected from Statistics Sweden, while data on national accounts are collected from Penn World Tables. When applying the model to the Swedish sample, findings suggest that changing discrimination accounts for 43 percent of the growth in output per worker. A decline in discrimination is discovered when estimating the model. Further, the estimated output per worker is in line with the actual output per worker observed in the period, suggesting that the model is appropriate. The results support the common view that human capital is a source of economic growth.