The main goal of the paper is to show the application of the projection method as a tool for the analysis of transitional dynamics of endogenous growth models, the analysis which is very often omitted in common literature on the topic. The application of the method is demonstrated on an...

We model the teacher-student relationship as an agency problem, where teachers are concerned with human capital formation and students --- ability signaling. The model's distinctive feature is that with grading rules unobservable for the job market the teacher finds grades costless incentives....