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Inequality and Mobility

  • John Hassler
  • José Vicente Rodríguez Mora
  • Joseph Zeira

This paper presents a theoretical model that can aid the understanding of how wage inequality and mobility are jointly determined. The model shows that the correlation between inequality and mobility can be used to identify the cause of changes in inequality. Changes in the production sector lead to a positive correlation between the two variables, while changes in the education sector lead to a negative correlation. A better understanding of the causes for changes in inequality over time or across countries can therefore be achieved by observing changes in mobility as well. The model is applied to some empirical issues, like the recent rise in the skill premium, and international differences in inequality and mobility. The paper also shows that skilled parents might prefer more public education than unskilled parents, if the educational barriers for children of unskilled are high.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 23.

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Date of creation: May 2003
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Handle: RePEc:bge:wpaper:23
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