Educational Signaling, Credit Constraints and Inequality Dynamics
AbstractWe present a dynamic OLG model of educational signaling and inequality with missing credit markets. Agents are characterized by two sources of unobserved heterogeneity: ability and parental income, consistent with empirical evidence on returns to schooling. Both quantity and quality of human capital evolve endogenously. The model generates a Kuznets inverted-U pattern in skill premia similar to historical US and UK experience. In the first (resp. later) phase the skill premium rises (falls), social returns to education exceed (falls below) private returns: under-investment owing to financial imperfections dominate (are dominated by) over-investment owing to signaling distortions. There always exist Pareto-improving policy interventions reallocating education between poor and rich children.
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 InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2010-035.
Length: 47 pages
Date of creation: Jan 2010
Date of revision:
Other versions of this item:
- Marcello D'Amato & Dilip Mookherjee, 2012. "Educational Signaling, Credit Constraints and Inequality Dynamics," CSEF Working Papers 311, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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.:
- Igal Hendel & Joel Shapiro & Paul Willen, 2003.
"Educational Opportunity and Income Inequality,"
89, Barcelona Graduate School of Economics.
- Igal Hendel & Joel Shapiro & Paul Willen, 2004. "Educational opportunity and income inequality," Public Policy Discussion Paper 04-5, Federal Reserve Bank of Boston.
- Paul Willen & Igal Hendel & Joel Shapiro, 2004. "Educational Opportunity and Income Inequality," NBER Working Papers 10879, National Bureau of Economic Research, Inc.
- Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
- Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-64, October.
- David Card, 2000.
"Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems,"
NBER Working Papers
7769, National Bureau of Economic Research, Inc.
- Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Dilip Mokherjee & Stefan Napel, 2006.
"Intergenerational Mobility and Macroeconomic History Dependence,"
1, Aboa Centre for Economics.
- Mookherjee, Dilip & Napel, Stefan, 2007. "Intergenerational mobility and macroeconomic history dependence," Journal of Economic Theory, Elsevier, vol. 137(1), pages 49-78, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Courtney Sullivan).
If references are entirely missing, you can add them using this form.