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Intergenerational Earnings Mobility, Inequality, and Growth

  • Ann L. Owen
  • David N. Weil

We examine a model in which per capita income, inequality, intergenerational mobility, and returns to education are all determined endogenously. Individuals earn wages depending on their ability, which is a random variable. They purchase an education with transfers received from their parents, and are subject to liquidity constraints. In the model, multiple steady state equilibria are possible: countries with identical tastes and technologies can reach differing rates of mobility, inequality, and per capita income. Equilibria with higher levels of output also have lower inequality, higher mobility, and more efficient distribution of education.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6070.

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Date of creation: Jun 1997
Date of revision:
Publication status: published as Journal of Monetary Economics, 1998.
Handle: RePEc:nbr:nberwo:6070
Note: EFG
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  1. Barro, R.J. & Mankiw, N.G. & Sala-i-Martin, X., 1992. "Capital Mobility in Neoclassical Models of Growth," Papers 655, Yale - Economic Growth Center.
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  7. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
  8. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
  9. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  10. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  11. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  12. Durlauf, Steven N., 1994. "Spillovers, stratification, and inequality," European Economic Review, Elsevier, vol. 38(3-4), pages 836-845, April.
  13. Tamura, R., 1991. "From Decay to Growth : A Dynamic Equilibrium Model of Income Distribution," Working Papers 91-18, University of Iowa, Department of Economics.
  14. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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