Skill Dynamics, Inequality and Social Policies
Within a model where the parents make the decisions relating to their children’s education, we show that skill dynamics normally results in a sub-optimal situation involving income per capita. This derives from an under-education trap that is endogenously generated. When sub-optimality is caused by a lack of human capital at the steady state, a minimum wage or a redistribution policy makes it possible to increase output per capita and to reduce inequality because both increase the educated share of the population by raising certain households above the trap. These policies only need to be implemented over one period of time, i.e. one generation. Moreover, the sooner they are laid down, the more efficient these policies become. Finally, the income per head at the steady state is higher when individuals have naive expectations rather than when they have perfect predictions. Several simulations are performed that illustrate and corroborate these findings.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Becker, Gary S & Tomes, Nigel, 1976.
"Child Endowments and the Quantity and Quality of Children,"
Journal of Political Economy,
University of Chicago Press, vol. 84(4), pages 143-162, August.
- Gary S. Becker & Nigel Tomes, 1976. "Child Endowments, and the Quantity and Quality of Children," NBER Working Papers 0123, National Bureau of Economic Research, Inc.
- Viaene, J.-M. & Zilcha, I., 2001. "Human Capital Formation, Income Inequality and Growth," Papers 2001-13, Tel Aviv.
- Jean-Marie Viaene & Itzhak Zilcha, 2001. "Human Capital Formation, Income Inequality and Growth," Tinbergen Institute Discussion Papers 01-104/2, Tinbergen Institute.
- Jean-Marie Viaene & Itzhak Zilcha, 2001. "Human Capital Formation, Income Inequality and Growth," CESifo Working Paper Series 512, CESifo Group Munich.
- Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
- Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, vol. 39(7), pages 1257-1275, August.
- Barham, V. & Boadway, R. & Marchand, M. & Pestieau, P., "undated". "Education and the poverty trap," CORE Discussion Papers RP 1173, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BARHAM, Vicky & BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, 1992. "Education and the poverty trap," CORE Discussion Papers 1992010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Orazem, Peter & Tesfatsion, Leigh, 1997. "Macrodynamic Implications of Income-Transfer Policies for Human Capital Investment and School Effort," Journal of Economic Growth, Springer, vol. 2(3), pages 305-329, September.
- Orazem, Peter & Tesfatsion, Leigh S., 1997. "Macrodynamic Implications of Income Transfer Policies for Human Capital Investment and School Effort," Staff General Research Papers Archive 1683, Iowa State University, Department of Economics.
- Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, vol. 69(1), pages 67-82, July.
- Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
- Peter H. Lindert, "undated". "Three Centuries Of Inequality In Britain And America," Department of Economics 97-09, California Davis - Department of Economics.
- Katarina Nordblom, 2001. "Within-the-family education and its impact on equality," Public Economics 0105004, EconWPA.
- Nordblom, K., 2001. "Within-the-Family Education and Its Impact on Equality," Papers 2001:06, Uppsala - Working Paper Series.
- Nordblom, Katarina, 2001. "Within-the-Family Education and its Impact on Equality," Working Paper Series 2001:6, Uppsala University, Department of Economics.
- Alan Manning, 1995. "How Do We Know That Real Wages Are Too High?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1111-1125.
- Alan Manning, 1994. "How do we Know that Real Wages are Too High?," CEP Discussion Papers dp0195, Centre for Economic Performance, LSE.
- Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
- Plug, Erik & Vijverberg, Wim P., 2001. "Schooling, Family Background, and Adoption: Does Family Income Matter?," IZA Discussion Papers 246, Institute for the Study of Labor (IZA).
- Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476 Elsevier.
- Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:inq:inqwps:ecineq2006-34. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Ana Lugo)
If references are entirely missing, you can add them using this form.