Authors: Tiraphap Fakthong
In this paper, I examine convergence in income inequality and economic growth under two governmental regimes on human capital where the first one has only education subsidy and the second one has education subsidy and research & development investment. This study using endogenous growth framework with human capital and technological progress hypothesized that, under education and research & development investment, human capital and technological progress can produce a higher global effect to the country in the long run. This will result in the convergence in income where poor dynasty/regions grow faster than rich dynasty/regions in the long run. From model simulation, I found that, in the poor economy, when adding a research & development investment in addition to education subsidy, convergence in income and long-run economic growth perform better than another scenario which has only education subsidy. Empirically, this pattern has been validated on Thailand’s provincial level where conditional convergence of growth rate per capita among these provinces tends to converge faster between the periods of 2000 – 2009.
Keywords: Research & Development; Education Subsidy; Convergence in Income Inequality; Growth