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Inequality and mobility

  • John Hassler

    ()

  • José Rodríguez Mora

    ()

  • Joseph Zeira

Acknowledging that wage inequality and intergenerational mobility are strongly interrelated, this paper presents a model in which both are jointly determined. The model enables us to study how inequality and mobility are affected by exogenous changes and what determines their correlation. A main implication of the model is that differences in the amount of public subsidies to education and educational quality produce cross-country patterns with a negative correlation between inequality and mobility. Differences in the labor market, like differences in skill-biased technology or wage compression instead produce a positive correlation. The predictions of the model are found to be consistent with various empirical observations on mobility and inequality.

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File URL: http://hdl.handle.net/10.1007/s10887-007-9019-x
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Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 12 (2007)
Issue (Month): 3 (September)
Pages: 235-259

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Handle: RePEc:kap:jecgro:v:12:y:2007:i:3:p:235-259
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