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Dual Poverty Trap: Intra- and Intergenerational Linkages in Frictional Labor Markets

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Author Info
Horii, Ryo
Sasaki, Masaru

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Abstract

This paper constructs an overlapping generations model with a frictional labor market to explain persistent low education in developing countries. When parents are uneducated, their children often face difficulties in finishing school and therefore are likely to remain uneducated. Moreover, if children expect that other children of the same generation will not receive an education, they expect that firms will not create enough jobs for educated workers, and thus are further discouraged from schooling. These intergenerational and intragenerational mechanisms reinforce each other, creating a serious poverty trap. Escape from the trap requires the well-organized and combined implementation of a subsidy for schooling, the provision of free education, support for disadvantaged children, and public awareness programs.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13484.

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Date of creation: 23 Nov 2008
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Handle: RePEc:pra:mprapa:13484

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Related research
Keywords: overlapping generations model; education; poverty trap; job search; coordination failure.;

Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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  3. Matthias Doepke & Fabrizio Zilibotti, 2005. "The Macroeconomics of Child Labor Regulation," American Economic Review, American Economic Association, vol. 95(5), pages 1492-1524, December. [Downloadable!]
    Other versions:
  4. Basu, Kaushik, 2000. "The Intriguing Relation between Adult Minimum Wage and Child Labour," Economic Journal, Royal Economic Society, vol. 110(462), pages C50-61, March. [Downloadable!] (restricted)
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  5. Takashi KUROSAKI & Seiro ITO & Nobuhiko FUWA & Kensuke KUBO & Yasuyuki SAWADA, 2006. "Child Labor And School Enrollment In Rural India: Whose Education Matters?," The Developing Economies, Institute of Developing Economies, vol. 44(4), pages 440-464. [Downloadable!] (restricted)
  6. Laing, Derek & Palivos, Theodore & Wang, Ping, 1995. "Learning, Matching and Growth," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 115-29, January. [Downloadable!] (restricted)
  7. Omer Moav, 2005. "Cheap Children and the Persistence of Poverty," Economic Journal, Royal Economic Society, vol. 115(500), pages 88-110, 01. [Downloadable!] (restricted)
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  8. Hoff, Karla & Pandey, Priyanka, 2004. "Belief systems and durable inequalities : an experimental investigation of Indian caste," Policy Research Working Paper Series 3351, The World Bank. [Downloadable!]
  9. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July. [Downloadable!] (restricted)
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  10. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April. [Downloadable!] (restricted)
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  11. William Easterly, 2008. "Can the West Save Africa?," NBER Working Papers 14363, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Blackwell Publishing, vol. 64(3), pages 445-64, July. [Downloadable!] (restricted)
  13. Smith, E. & Burdett, K., 1995. "The Low Skill Trap," UBC Departmental Archives 95-40, UBC Department of Economics.
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