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Persistent Inequality: An Explanation Based on Limited Parental Altruism

  • Mausumi Das

    (Delhi School of Economics)

This paper provides an explanation for the observed persistence in income inequality across households in terms limited parental altruism. We postulate that the degree of parental altruism is 'limited' by the financial status of the parent. A poor parent not only has less ability, but also has less concern about children's welfare. This generates a non-linearity in the human capital formation for poor vis-à-vis rich households. With a constant returns to scale technology for human capital formation it implies that initial income differences may perpetuate over time. We also derive the conclusion that the initial distribution of income is important for long run growth - a conclusion that conforms to some of the recent works in this field, notably that of Galor and Zeira.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 101.

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Length: 21 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:cde:cdewps:101
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