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Persistent Inequality

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Author Info
Dilip Mookherjee () (Institute for Economic Development, Boston University)
Debraj Ray () (Department of Economics, New York University)

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Abstract

When human capital accumulation generates pecuniary externalities across professions, and capital markets are imperfect, persistent inequality in utility and consumption is inevitable in any steady state. This is true irrespective of the degree of divisibility in investments. However, divisibility (or fineness of occupational structure) has implications for both the multiplicity and Pareto-efficiency of steady states. Indivisibilities generate a continuum of inefficient and efficient steady states with varying per capita income On the other hand, perfect divisibility typically implies the existence of a unique steady state distribution which is Pareto-efficient.

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Publisher Info
Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-108.

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Length: 25 pages
Date of creation: Sep 2000
Date of revision: Oct 2002
Publication status: published, Review of Economic Studies (2003) 70, 269-293
Handle: RePEc:bos:iedwpr:dp-108

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  1. Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  2. Matsuyama, Kiminori, 2000. "Endogenous Inequality," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 743-59, October.
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  3. Dilip Mookherjee & Debraj Ray, 2000. "Contractual Structure and Wealth Accumulation," Boston University - Institute for Economic Development 107, Boston University, Institute for Economic Development.
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  4. Dilip Mookherjee & Debraj Ray, 2002. "Is Equality Stable?," American Economic Review, American Economic Association, vol. 92(2), pages 253-259, May. [Downloadable!]
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  5. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  6. Maoz, Yishay D & Moav, Omer, 1999. "Intergenerational Mobility and the Process of Development," Economic Journal, Royal Economic Society, vol. 109(458), pages 677-97, October. [Downloadable!] (restricted)
  7. repec:fth:bosecd:108 is not listed on IDEAS
  8. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January. [Downloadable!] (restricted)
  9. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June. [Downloadable!] (restricted)
  10. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  11. Dilip Mookherjee & Debraj Ray, 2003. "Persistent Inequality," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 369-393, 04. [Downloadable!] (restricted)
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  12. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December. [Downloadable!] (restricted)
  13. Ray, Debraj & Streufert, Peter A, 1993. "Dynamic Equilibria with Unemployment Due to Undernourishment," Economic Theory, Springer, vol. 3(1), pages 61-85, January.
  14. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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