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The determinants of long-run inequality

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  • Andrea, Canidio
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    Abstract

    I explore the effect of skill-biased technological change on long-run inequality by building a model where the supply of skilled and unskilled workers, the cost of education, and credit rationing are endogenous. In the model, the existence of unequal steady states does not depend on the degree of technological skill bias, but on the credit market, the cost of education, and the growth rate of the economy. However, by building an appropriate measure of inequality, I show that when unequal steady states exist, economies with a higher technological skill bias have a greater long-run inequality. Therefore, the impact of skill-biased technological change on inequality may be permanent.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25137.

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    Date of creation: May 2009
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    Handle: RePEc:pra:mprapa:25137

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    Keywords: Endogenous Inequality; Skill Bias; Credit Rationing; Growth;

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    1. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 843-67, June.
    2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
    3. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
    4. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Dilip Mokherjee & Stefan Napel, 2006. "Intergenerational Mobility and Macroeconomic History Dependence," Discussion Papers, Aboa Centre for Economics 1, Aboa Centre for Economics.
    6. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    7. Robert M. Townsend & Kenichi Ueda, 2006. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 251-293.
    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 410-42, June.
    9. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 469-497, May.
    10. Dilip Mookherjee & Debraj Ray, 2005. "Occupational Diversity and Endogenous Inequality," Boston University - Department of Economics - Working Papers Series WP2005-022, Boston University - Department of Economics.
    11. Rigolini, Jamele, 2004. "Education technologies, wages and technological progress," Journal of Development Economics, Elsevier, vol. 75(1), pages 55-77, October.
    12. 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, University of Chicago Press, vol. 87(6), pages 1153-89, December.
    13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    14. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
    15. Piketty, Thomas, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(2), pages 173-89, April.
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