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Endogenous persistent inequality

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  • Falilou Fall

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    (EUREQua)

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    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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    File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2005/V05059.pdf
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    Bibliographic Info

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

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    References

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    1. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
    2. Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
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    14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    15. Kiminori Matsuyama, 1998. "Endogenous Inequality," Discussion Papers 1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    16. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
    17. Dominique Rouault, 2001. "Les revenus des indépendants et dirigeants : la valorisation du bagage personnel," Économie et Statistique, Programme National Persée, vol. 348(1), pages 35-59.
    18. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
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    Cited by:
    1. Growiec, Katarzyna & Growiec, Jakub, 2009. "Social Capital, Trust, and Multiple Equilibria in Economic Performance," MPRA Paper 19518, University Library of Munich, Germany.

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