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Poverty and Disequalization

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  • Mookherjee Dilip

    (Boston University)

  • Ray Debraj

    (New York University)

Abstract

We study the intergenerational transmission of inequality using a model in which parents can make both financial and occupational bequests to their children. An equal steady state with high per capita skill can co-exist with unequal steady states with low per capita skill. We investigate dynamics starting from arbitrary initial conditions. The main result is that even if a country starts with a perfectly equal wealth distribution, it converges to an unequal steady state if its initial per capita wealth falls below a threshold, and to the equal steady state otherwise. Hence initial poverty (even with perfect equality) can generate long-term inequality, and undermine economic development.

Suggested Citation

  • Mookherjee Dilip & Ray Debraj, 2010. "Poverty and Disequalization," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-20, January.
    • Handle: RePEc:bpj:globdv:v:1:y:2010:i:1:n:3
    DOI: 10.2202/1948-1837.1022
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    References listed on IDEAS

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