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Poverty and Disequalization

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Author Info

  • Mookherjee Dilip

    (Boston University)

  • Ray Debraj

    (New York University)

Abstract

We study the intergenerational transmission of inequality using a model in which parents can make both financial and occupational bequests to their children. An equal steady state with high per capita skill can co-exist with unequal steady states with low per capita skill. We investigate dynamics starting from arbitrary initial conditions. The main result is that even if a country starts with a perfectly equal wealth distribution, it converges to an unequal steady state if its initial per capita wealth falls below a threshold, and to the equal steady state otherwise. Hence initial poverty (even with perfect equality) can generate long-term inequality, and undermine economic development.

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File URL: http://www.degruyter.com/view/j/jgd.2010.1.1/jgd.2010.1.1.1022/jgd.2010.1.1.1022.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Journal of Globalization and Development.

Volume (Year): 1 (2010)
Issue (Month): 1 (January)
Pages: 1-20

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Handle: RePEc:bpj:globdv:v:1:y:2010:i:1:n:3

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Web page: http://www.degruyter.com

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