Endogenous persistent inequality
AbstractThe 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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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05059.
Length: 33 pages
Date of creation: Oct 2005
Date of revision:
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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, Vacancies, and Immigrant Workers - - - 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-12 (All new papers)
- NEP-DGE-2005-11-12 (Dynamic General Equilibrium)
- NEP-ENT-2005-11-12 (Entrepreneurship)
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