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Endogenous persistent inequality

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Author Info
Falilou Fall () (EUREQua)
Abstract

The purpose of this paper is to demonstrate that inherited human capital is a powerful vector of inequality formation and persistence, irrespective of its links with financial wealth endowment. This paper argues that the agents who inherit a low level of human capital bear a greater utility cost in their educational investment and that there are different profiles of returns on human capital within the economy. These two arguments are sufficient to generate an endogenous formation of workers' and entrepreneurs' groups and a continuum of steady states with inequality. Allowing for self-employment in the model generates the possibility of equality at equilibrium in addition to the inequality equilibrium with the emergence of a middle class.

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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05059.

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Length: 33 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:mse:wpsorb:v05059

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Related research
Keywords: Endogenous inequality; human capital; occupational choice; education.;

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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