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Human Capital and Income Distribution Dynamics

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  • Massimo Giannini

    (University of Rome "Tor Vergata")

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    Abstract

    The paper assumes a continuum of two period-lived agents; agents are identical except for the inherited income. Young agents optimally allocate their inherited income between consumption and investment in human capital in a stochastic environment. In the second period they receive a wage proportional to the accumulated human capital and invest in offspring. Two main results are provided: a low earning per unit of human capital leads the economy to converge to a stationary income distribution whatever the initial distribution. Viceversa, for a sufficently high wage an endogenous growth is at work and the income distribution dynamics depends on the initial conditions. In this case several redistributive policies are analized.

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    File URL: http://128.118.178.162/eps/ge/papers/9802/9802004.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series GE, Growth, Math methods with number 9802004.

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    Date of creation: 26 Feb 1998
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    Handle: RePEc:wpa:wuwpge:9802004

    Note: Type of Document - PDF; prepared on IBM PC -; to print on HP;
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    Web page: http://128.118.178.162

    Related research

    Keywords: Human Capital Accumulation Personal Income Distribution Diffusion Processes;

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    1. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
    2. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
    3. repec:fth:coluec:595 is not listed on IDEAS
    4. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
    5. Persson, Torsten & Tabellini, Guido, 1992. "Growth, distribution and politics," European Economic Review, Elsevier, vol. 36(2-3), pages 593-602, April.
    6. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    7. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
    8. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
    9. Galor, Oded & Tsiddon, Daniel, 1997. " The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
    10. Daron Acemoglu, 1995. "Matching, Heterogeneity and the Evolution of Income Distribution," Working papers 95-25, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. Vaughan, R N, 1979. "Class Behaviour and the Distribution of Wealth," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 447-65, July.
    12. Atkinson, A. B., 1995. "Is the Welfare State necessarily an obstacle to economic growth?," European Economic Review, Elsevier, vol. 39(3-4), pages 723-730, April.
    13. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
    14. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
    15. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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