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The inheritance of Advantage

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  • Jose Rodriguez Mora

    (University of Edinburgh)

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    Abstract

    Some agents are better treated by the market than others. In our model this arises from statistical discrimination based on the observables on the background of an individual. Advantages thus created increase the intergenerational correlation of income. This has some strong implications. First, it implies that intergenerational mobility and income inequality should correlate negatively. Second, the amplication mechanism generated by advantages may produce a multiplicity of steady states. Third, the introduction of "meritocracy" (informative signals on talent) may actually decrease mobility due to general equilibrium effects: by increasing income dispersion, they also increase the value of background.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 872.

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    Date of creation: 2013
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    Handle: RePEc:red:sed013:872

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    1. Moro,A. & Norman,P., 2001. "A general equilibrium model of statistical discrimination," Working papers 4, Wisconsin Madison - Social Systems.
    2. John Hassler & José Rodríguez Mora & Joseph Zeira, 2007. "Inequality and mobility," Journal of Economic Growth, Springer, vol. 12(3), pages 235-259, September.
    3. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2008. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," NBER Working Papers 13951, National Bureau of Economic Research, Inc.
    4. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer Learning and Statistical Discrimination," NBER Working Papers 6279, National Bureau of Economic Research, Inc.
    5. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
    6. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
    7. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
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