Equilibrium Income Inequality among Identical Agents
AbstractThe paper offers a theory of income differences in which income inequality exists and persists despite identical tastes and talents. Teams of unskilled labor supervised by schooled managers produce goods with increasing returns to scale. Agents are assumed unable to borrow to fund the human capital investment needed to become managers. Despite ex ante identical agents, the model displays the following equilibrium phenomena: (1) risk-averse agents accept fair gambles, implying an unequal ex post distribution of unearned income; (2) agents agree to publicly subsidize education, although those receiving the subsidy have the highest material wealth; and (3) incomes and educational differences are perpetuated from generation to generation. Copyright 1996 by University of Chicago Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 104 (1996)
Issue (Month): 5 (October)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JPE/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marshall, John M, 1984. "Gambles and the Shadow Price of Death," American Economic Review, American Economic Association, vol. 74(1), pages 73-86, March.
- Oded Galor & Joseph Zeira, 2013.
"Income Distribution and Macroeconomics,"
2013-12, Brown University, Department of Economics.
- Waldman, Michael, 1984. "Worker Allocation, Hierarchies and the Wage Distribution," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 95-109, January.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Ng Yew Kwang, 1965. "Why do People Buy Lottery Tickets? Choices Involving Risk and the Indivisibility of Expenditure," Journal of Political Economy, University of Chicago Press, vol. 73, pages 530.
- Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1993.
"The Carnegie Conjecture: Some Empirical Evidence,"
The Quarterly Journal of Economics,
MIT Press, vol. 108(2), pages 413-35, May.
- Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
- Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
- Garratt, Rod & Marshall, John M, 1994. "Public Finance of Private Goods: The Case of College Education," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 566-82, June.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.