Skill Dynamics, Inequality and Social Policies
AbstractWithin a model where the parents make the decisions relating to their children’s education, we show that skill dynamics normally results in a sub-optimal situation involving income per capita. This derives from an under-education trap that is endogenously generated. When sub-optimality is caused by a lack of human capital at the steady state, a minimum wage or a redistribution policy makes it possible to increase output per capita and to reduce inequality because both increase the educated share of the population by raising certain households above the trap. These policies only need to be implemented over one period of time, i.e. one generation. Moreover, the sooner they are laid down, the more efficient these policies become. Finally, the income per head at the steady state is higher when individuals have naive expectations rather than when they have perfect predictions. Several simulations are performed that illustrate and corroborate these findings.
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 ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 34.
Length: 32 pages
Date of creation: 2006
Date of revision:
Education; Inequality; Minimum wage; Redistribution.;
Find related papers by JEL classification:
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
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.:
- Alan Manning, 1994.
"How do we Know that Real Wages are Too High?,"
CEP Discussion Papers
dp0195, Centre for Economic Performance, LSE.
- Jean-Marie Viaene & Itzhak Zilcha, 2001.
"Human Capital Formation, Income Inequality and Growth,"
Tinbergen Institute Discussion Papers
01-104/2, Tinbergen Institute.
- Jean-Marie Viaene & Itzhak Zilcha, 2001. "Human Capital Formation, Income Inequality and Growth," CESifo Working Paper Series 512, CESifo Group Munich.
- Viaene, J.-M. & Zilcha, I., 2001. "Human Capital Formation, Income Inequality and Growth," Papers 2001-13, Tel Aviv.
- Peter H. Lindert, .
"Three Centuries Of Inequality In Britain And America,"
Department of Economics
97-09, California Davis - Department of Economics.
- Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
- Orazem, Peter & Tesfatsion, Leigh S., 1997.
"Macrodynamic Implications of Income Transfer Policies for Human Capital Investment and School Effort,"
Staff General Research Papers
1683, Iowa State University, Department of Economics.
- Orazem, Peter & Tesfatsion, Leigh, 1997. " Macrodynamic Implications of Income-Transfer Policies for Human Capital Investment and School Effort," Journal of Economic Growth, Springer, vol. 2(3), pages 305-29, September.
- Gary S. Becker & Nigel Tomes, 1976.
"Child Endowments, and the Quantity and Quality of Children,"
NBER Working Papers
0123, National Bureau of Economic Research, Inc.
- Becker, Gary S & Tomes, Nigel, 1976. "Child Endowments and the Quantity and Quality of Children," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S143-62, August.
- Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
- Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995.
"Education and the poverty trap,"
European Economic Review,
Elsevier, vol. 39(7), pages 1257-1275, August.
- Nordblom, K., 2001.
"Within-the-Family Education and Its Impact on Equality,"
2001:06, Uppsala - Working Paper Series.
- Nordblom, Katarina, 2001. "Within-the-Family Education and its Impact on Equality," Working Paper Series 2001:6, Uppsala University, Department of Economics.
- Katarina Nordblom, 2001. "Within-the-family education and its impact on equality," Public Economics 0105004, EconWPA.
- Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April.
- Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476 Elsevier.
- Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, vol. 69(1), pages 67-82, July.
- Plug, Erik & Vijverberg, Wim P., 2001. "Schooling, Family Background, and Adoption: Does Family Income Matter?," IZA Discussion Papers 246, Institute for the Study of Labor (IZA).
- 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.
- N. Bauduin & N. Chusseau & J. Hellier, 2008. "Combining minimum wage and exchange rate policy to release the external constraint on growth," International Review of Applied Economics, Taylor and Francis Journals, vol. 22(3), pages 299-320.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Ana Lugo).
If references are entirely missing, you can add them using this form.