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Inequality and Markets: Some Implications of Occupational Diversity

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  • Dilip Mookherjee
  • Debraj Ray

Abstract

This paper studies income distribution in an economy with borrowing constraints. Parents leave both financial and educational bequests; these determine the occupational choices of children. Occupational returns are determined by market conditions. If the span of occupational investments is large, long-run wealth distributions display persistent inequality. With a "rich" set of occupations, so that training costs form an interval, the distribution is unique and the average return to education must rise with educational investment. This finding contrasts with the usual presumption of diminishing returns to human capital. It is the central testable proposition of this paper. (JEL D14, D31, J24)

Suggested Citation

  • Dilip Mookherjee & Debraj Ray, 2010. "Inequality and Markets: Some Implications of Occupational Diversity," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 38-76, November.
    • Handle: RePEc:aea:aejmic:v:2:y:2010:i:4:p:38-76
    Note: DOI: 10.1257/mic.2.4.38
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    Cited by:

    1. Dilip Mookherjee & Debraj Ray, 2022. "Growth, Automation and the Long-Run Share of Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 1-26, October.
    2. Okoampah, Sarah, 2016. "Cohort size effects on wages, working status, and work time," Ruhr Economic Papers 629, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Dilip Mookherjee & Debraj Ray, 2022. "Growth, Automation and the Long-Run Share of Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 1-26, October.
    4. Roberto Brunetti & Carl Gaigné & Fabien Moizeau, 2023. "Land, Wealth, and Taxation," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2023-06, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    5. Napel, Stefan, 2014. "A Pareto Efficiency Rationale for the Welfare State," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100496, Verein für Socialpolitik / German Economic Association.
    6. Marcello D'Amato & Christian Di Pietro & Marco M. Sorge, 2023. "Left and Right: A Tale of Two Tails of the Wealth Distribution," CSEF Working Papers 691, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Bishnu, Monisankar & Wang, Min, 2017. "The political intergenerational welfare state," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 93-110.
    8. Gautam Bose & Arghya Ghosh, 2022. "Affirmative Action, Equal Opportunity, or just tax the rich? Development, efficiency, and the pursuit of equity," Discussion Papers 2022-02, School of Economics, The University of New South Wales.
    9. Atul Mehta & Joysankar Bhattacharya, 2017. "What Works Best for the Poor in Rural India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(2), pages 230-245, September.
    10. begard Iversen & Anirudh Krishna & Kunal Sen, 2017. "Beyond poverty escapes – social mobility in the Global South: A survey article," Global Development Institute Working Paper Series 172017, GDI, The University of Manchester.
    11. Mookherjee, Dilip & Napel, Stefan, 2021. "Welfare rationales for conditionality of cash transfers," Journal of Development Economics, Elsevier, vol. 151(C).
    12. Binelli Chiara, 2015. "How the wage-education profile got more convex: evidence from Mexico," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 509-560, July.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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