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Inequality and Mobility

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Author Info
Hassler, John
Rodríguez Mora, José Vicente
Zeira, Joseph

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Abstract

We use a general equilibrium OLG model to analyse the relation between intergenerational social mobility and wage inequality. We show that the correlation between mobility and inequality depends on which factor caused the change in inequality. The model can thus help discriminate between different competing explanations of the recent rise in US wage inequality. Under reasonable assumptions, skill-biased technical change tends to increase upward mobility, thereby causing a positive correlation between wage inequality and mobility. Public subsidies to education reduce inequality, but the effect on mobility is ambiguous and depends on how well households with non-skilled parents can take advantage of the subsidy. The relation between subsidies and upward mobility is always concave in the short run and may also be so in the long run. Under some circumstances, the relationship between public support for education and mobility can follow an inverted U-pattern. The model can thus provide an explanation to different patterns of inequality and social mobility in Europe and the US.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2497.

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Date of creation: Jul 2000
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Handle: RePEc:cpr:ceprdp:2497

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Related research
Keywords: Educational Policy Inequality Intergenerational Mobility Skill-Bias

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Find related papers by JEL classification:
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

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  2. Andreas Hornstein & Per Krusell, 2003. "Implications of the capital-embodiment revolution for directed R&D and wage inequality," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 25-50. [Downloadable!]
  3. John Hassler & Jose V. Rodriguez Mora, 2000. "Intelligence, Social Mobility, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 888-908, September. [Downloadable!] (restricted)
  4. Owen, Ann L. & Weil, David N., 1998. "Intergenerational earnings mobility, inequality and growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 71-104, February. [Downloadable!] (restricted)
    Other versions:
  5. Galor, Oded & Tsiddon, Daniel, 1996. "Income Distribution and Growth: The Kuznets Hypothesis Revisited," Economica, London School of Economics and Political Science, vol. 63(250), pages S103-17, Suppl.. [Downloadable!] (restricted)
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  7. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
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  9. Matthias Doepke & Fabrizio Zilibotti, 2005. "The Macroeconomics of Child Labor Regulation," American Economic Review, American Economic Association, vol. 95(5), pages 1492-1524, December. [Downloadable!] (restricted)
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  10. Fernandez, Raquel & Rogerson, Richard, 1998. "Public Education and Income Distribution: A Dynamic Quantitative Evaluation of Education-Finance Reform," American Economic Review, American Economic Association, vol. 88(4), pages 813-33, September. [Downloadable!] (restricted)
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  12. Roland Benabou, 2002. "Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Econometrica, Econometric Society, vol. 70(2), pages 481-517, March. [Downloadable!] (restricted)
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  13. repec:att:wimass:199329 is not listed on IDEAS
  14. Paul Ryan, 2001. "The School-to-Work Transition: A Cross-National Perspective," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 34-92, March. [Downloadable!] (restricted)
  15. 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.
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  18. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. 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)
  20. Björklund, Anders & Eriksson, Tor & Jäntti, Markus & Raaum, Oddbjörn & Österbacka, Eva, 2000. "Brother Correlations in Earnings in Denmark, Finland, Norway and Sweden Compared to the United States," IZA Discussion Papers 158, Institute for the Study of Labor (IZA). [Downloadable!]
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  21. Susan E. Mayer & Leonard Michael Lopoo, 2001. "Has the Intergenerational Transmission of Economic Status Changed?," JCPR Working Papers 227, Northwestern University/University of Chicago Joint Center for Poverty Research. [Downloadable!]
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  27. 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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  28. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
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  30. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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  31. Checchi, Daniele & Ichino, Andrea & Rustichini, Aldo, 1999. "More equal but less mobile?: Education financing and intergenerational mobility in Italy and in the US," Journal of Public Economics, Elsevier, vol. 74(3), pages 351-393, December. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Michele Bernasconi & Paola Profeta, 2007. "Redistribution or Education? The Political Economy of the Social Race," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  2. Assar Lindbeck, 2002. "Changing Tides for the Welfare State -- An Essay," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Panu Poutvaara, 2003. "On the Political Economy of Social Security and Public Education," Public Economics 0303001, EconWPA. [Downloadable!]
    Other versions:
  4. Bianchi, Milo, 2006. "Immigration Policy and Self-Selecting Migrants," Working Paper Series in Economics and Finance 627, Stockholm School of Economics, revised 02 Nov 2006. [Downloadable!]
    Other versions:
  5. Lykke E. Andersen & Alice Brooks & Alejandro F. Mercado, 2004. "Macroeconomic Policies to Increase Social Mobility and Growth in Bolivia," Development Research Working Paper Series 02/2004, Institute for Advanced Development Studies. [Downloadable!]
  6. Arnaud Lefranc & Nicolas Pistolesi & Alain Trannoy, 2006. "Inequality of opportunities vs. inequality of outcomes: Are Western societies all alike?," Working Papers 54, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
  7. Ryo Arawatari & Tetsuo Ono, 2008. "A Second Chance at Success: A Political Economy Perspective?," Discussion Papers in Economics and Business 08-04, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  8. Lindbeck, Assar, 2001. "Changing Tides For The Welfare State," Seminar Papers 694, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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