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The inheritance of Advantage

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  • Jose Rodriguez Mora

    (University of Edinburgh)

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.

Suggested Citation

  • Jose Rodriguez Mora, 2013. "The inheritance of Advantage," 2013 Meeting Papers 872, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:872
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    References listed on IDEAS

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    7. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
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