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Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information

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  • Gabrieli, Tommaso

Abstract

This paper presents a dynamic model to study how different levels of information about the root determinants of wealth (luck versus effort) can impact inequality and intergenerational mobility through societal beliefs, individual choices and redistributive policies. To my knowledge, the model presented is the first dynamic model in which skills are stochastic and both beliefs and voted redistribution are determined endogenously. The model is able to explain a number of empirical facts. Large empirical evidence shows that the difference in the political support for redistribution appears to reflect differences in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. Moreover the beliefs about the determinants of wealth impact individual choices of effort and therefore the beliefs about the determinants of wealth impact inequality and mobility both through choices of effort and redistributive policies. The model generates multiple equilibria (US versus Europe-type) which may account for the observed features not only in terms of societal beliefs and redistribution but also in terms of perceived versus real mobility and inequality.

Suggested Citation

  • Gabrieli, Tommaso, 2012. "Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information," The Journal of Economic Asymmetries, Elsevier, vol. 9(1), pages 23-49.
    • Handle: RePEc:eee:joecas:v:9:y:2012:i:1:p:23-49
    DOI: 10.1016/j.jeca.2012.01.002
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    1. Tommaso Gabrieli, 2016. "Spatial Segregation, Redistribution and Welfare: A Theoretical Model," Urban Planning, Cogitatio Press, vol. 1(1), pages 68-78.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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