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Persistent Inequality: An Explanation Based on Limited Parental Altruism

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Author Info
Mausumi Das (Delhi School of Economics)

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Abstract

This paper provides an explanation for the observed persistence in income inequality across households in terms limited parental altruism. We postulate that the degree of parental altruism is 'limited' by the financial status of the parent. A poor parent not only has less ability, but also has less concern about children's welfare. This generates a non-linearity in the human capital formation for poor vis-à-vis rich households. With a constant returns to scale technology for human capital formation it implies that initial income differences may perpetuate over time. We also derive the conclusion that the initial distribution of income is important for long run growth - a conclusion that conforms to some of the recent works in this field, notably that of Galor and Zeira.

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Publisher Info
Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 101.

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Length: 21 pages
Date of creation: Jun 2002
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Handle: RePEc:cde:cdewps:101

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Keywords: Income distribution human capital intergenerational mobility growth

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Find related papers by JEL classification:
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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  1. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1982. "Parental Preferences and Provision for Progeny," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 52-73, February. [Downloadable!] (restricted)
  2. Hisnanick, John J & Coddington, Dale A, 2000. "The Immunisation Status of Poor Children: An Analysis of Parental Altruism and Child Well-Being," Review of Social Economy, Taylor and Francis Journals, vol. 58(1), pages 81-107, March. [Downloadable!] (restricted)
  3. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 151-72, April. [Downloadable!] (restricted)
  4. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  5. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April. [Downloadable!] (restricted)
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  6. Benabou, Roland, 1994. "Human capital, inequality, and growth: A local perspective," European Economic Review, Elsevier, vol. 38(3-4), pages 817-826, April. [Downloadable!] (restricted)
  7. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 813-34, August.
  8. Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-64, October. [Downloadable!] (restricted)
  9. 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)
  10. Cardak, Buly A, 1999. "Heterogeneous Preferences, Education Expenditures and Income Distribution," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 63-76, March.
  11. Piketty, Thomas, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 173-89, April. [Downloadable!] (restricted)
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