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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
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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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  2. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
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  4. Fernandez, Raquel & Gali, Jordi, 1997. "To Each According to ...?: Markets, Tournaments, and The Matching Problem with Borrowing Constraints," Working Papers 97-11, C.V. Starr Center for Applied Economics, New York University.
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  7. 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.
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  14. Cooper, Suzanne J, 1998. " A Positive Theory of Income Redistribution," Journal of Economic Growth, Springer, vol. 3(2), pages 171-95, June.
  15. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  16. Michael Kremer, 1996. "How Much Does Sorting Increase Inequality?," NBER Working Papers 5566, National Bureau of Economic Research, Inc.
  17. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  18. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  19. 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.
  20. Daniel Chen & Michael Kremer, 1999. "Income-Distribution Dynamics with Endogenous Fertility," American Economic Review, American Economic Association, vol. 89(2), pages 155-160, May.
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