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Sources of Lifetime Inequality

  • Mark Huggett

    ()

    (Georgetown University)

  • Gustavo Ventura

    ()

    (University of Iowa)

  • Amir Yaron

    ()

    (The Wharton School, University of Pennsylvania)

Is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime.

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File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Huggett_Ventura_Yaron_2010_sources-lifetime-inequality.pdf
File Function: First version, November 16, 2010
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Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-020.

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Date of creation: Nov 2010
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Publication status: Forthcoming in American Economic Review
Handle: RePEc:hka:wpaper:2011-020
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