Peer Effects and the Promise of Social Mobility: A Model of Human Capital Investment
AbstractI analyze a model of human capital development in the presence of peer effects. Parents invest in their child, and this investment conveys a positive externality upon the child’s peers. Parents also acquire wealth, which i) finances consumption, and ii) determines a child’s peer group. I show how the freedom to compete for desirable peers exacerbates the natural underinvestment problem. The analysis thereby produces a general equilibrium framework in which the inefficiencies displayed in a rat-race interact with those stressed in the multi-tasking literature. I consider an extension in which both wealth and parental investment are observed with noise.
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Bibliographic InfoPaper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2010-09.
Length: 41 pages
Date of creation: May 2010
Date of revision:
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More information through EDIRC
Peer Effects; Premarital Investment; Matching; Human Capital;
Find related papers by JEL classification:
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-HRM-2010-07-17 (Human Capital & Human Resource Management)
- NEP-SOC-2010-07-17 (Social Norms & Social Capital)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
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