The non-stochastic steady state is described in Table A3 in Appendix. Panel 3 though 6 of Fig. 1 show the steady-state levels for main variables by age and productivity types. Since high types are very productive in learning compared to low type, they spend more time in education and accumulate more human capital in the steady state. Further, at the beginning of their life, they work less and borrow more physical capital to “finance” education. Although there are no direct monetary costs for education, an agent must sped less time working and forgo part of her labor income in order to study. Therefore, high types borrow physical capital to smooth consumption over time. Around age 25, the time spent studying is significantly reduced and the agent starts to invest in physical capital.