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Sorting and Long-Run Inequality

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  • Raquel Fernandez
  • Richard Rogerson

Abstract

Many social commentators have raised concerns over the possibility that increased sorting in a society can lead to greater inequality. To investigate this we construct a dynamic model of intergenerational education acquisition, fertility, and marital sorting and parameterize the steady state to match several basic empirical findings. Contrary to Kremer's (1997) finding of a basically insignificant effect of marital sorting on inequality, we find that increased marital sorting will significantly increase income inequality. Three factors are central to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children's years of education, and wages that are sensitive to the relative supply of skilled workers.

Suggested Citation

  • Raquel Fernandez & Richard Rogerson, 2000. "Sorting and Long-Run Inequality," NBER Working Papers 7508, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7508
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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • I2 - Health, Education, and Welfare - - Education

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