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Sorting and Long-Run Inequality

  • Raquel Fernandez
  • Richard Rogerson

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7508.

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Date of creation: Jan 2000
Date of revision:
Publication status: published as Fernandez, Raquel and Richard Rogerson. "Sorting And Long-Run Inequality," Quarterly Journal of Economics, 2001, v116(4,Nov), 1305-1341.
Handle: RePEc:nbr:nberwo:7508
Note: EFG LS
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  12. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  13. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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  15. Kremer, M., 1996. "How Much Does Sorting Increase Inequality?," Working papers 96-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  17. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
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  19. Raquel Fernandez & Richard Rogerson, 1997. "Education finance reform: A dynamic perspective," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 67-84.
  20. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
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  22. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
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