Poverty Traps and Human Capital Accumulation
In this paper, we analyze the emergence and persistence of poverty traps and study how wide-spread poverty and the unequal distribution of income can slow down the accumulation process and lead to steady-state equilibria characterized by low aggregate output levels. We define poverty as a state deriving from the lack of adequate skills and associate income inequality with the unequal distribution of education attainments. In this context the goal of our contribution is twofold. First, we show that low asymptotic mobility and persistent income inequality can emerge as a consequence of the fact that the poor require relatively higher returns to increase expenditure on education, so that they devote to education smaller shares of their income that the rich. Second, we critically evaluate our and other related results, in order to shed light on the explanatory power of different sets of assumptions.
|Date of creation:||Apr 1998|
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- Stiglitz, Joseph E, 1969.
"Distribution of Income and Wealth among Individuals,"
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- Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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- Oded Galor & Daniel Tsiddon, 1996. "The Distribution of Human Capital and Economic Growth," Working Papers 1996-32, Brown University, Department of Economics.
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- Durlauf, S.N., 1992. "A Theory of Persistent Income Inequality," Papers 47, Stanford - Institute for Thoretical Economics.
- Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
- Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
- Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189. Full references (including those not matched with items on IDEAS)
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