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Inequality and Mobility

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Author Info
Hassler, John (Institute for Internatioanl Economic Studies, Stockholm U)
Rodriguez Mora, Jose V. (U Pompeu Fabra and CEPR)
Zeira, Joseph (Hebrew U of Jerusalem)

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Abstract

We construct a model where wage inequality, intergenerational mobility and the distribution of skills are all jointly determined in general equilibrium, which is solved analytically. We show that it is important to treat these variables jointly, as they have a significant effect on each other. The model is used to understand both empirical regularities and policy implications. The main result of the paper is that changes in education, including public education, lead to a negative correlation between inequality and upward mobility, while changes in productivity tend to lead to a positive correlation between inequality and upward mobility. Hence, the observations that some European countries tend to be more equal but less socially mobile than the US, cannot be attributed to differences in public support to education, but rather to differences in productivity. Another result of the paper is that while public support to education benefits children of poor parents, it benefits children of skilled and rich parents by even more, improving their relative chances of success. Since parents care about their children, general public support to education can then increase the difference in welfare between skilled and non-skilled individuals, notwithstanding a reduction in wage inequality.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp02-009.

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Date of creation: Feb 2002
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Handle: RePEc:ecl:harjfk:rwp02-009

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References listed on IDEAS
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  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 Group Munich. [Downloadable!]
  2. Lindbeck, Assar, 2001. "Changing Tides for the Welfare State - An Essay," Working Paper Series 550, Research Institute of Industrial Economics. [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. 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).
    Other versions:
  5. 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:
  6. Ryo Arawatari & Tetsuo Ono, 2009. "Inequality, Mobility and Redistributive Taxation in a Finance-constrained Economy," Discussion Papers in Economics and Business 09-28, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  7. 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!]
  8. Lindbeck, Assar, 2001. "Changing Tides For The Welfare State," Seminar Papers 694, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  9. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics. [Downloadable!]
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