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The inheritance of Advantage

  • Jose Rodriguez Mora

    (University of Edinburgh)

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    Some agents are better treated by the market than others. In our model this arises from statistical discrimination based on the observables on the background of an individual. Advantages thus created increase the intergenerational correlation of income. This has some strong implications. First, it implies that intergenerational mobility and income inequality should correlate negatively. Second, the amplication mechanism generated by advantages may produce a multiplicity of steady states. Third, the introduction of "meritocracy" (informative signals on talent) may actually decrease mobility due to general equilibrium effects: by increasing income dispersion, they also increase the value of background.

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    File URL: https://www.economicdynamics.org/meetpapers/2013/paper_872.pdf
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    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 872.

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    Date of creation: 2013
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    Handle: RePEc:red:sed013:872
    Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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    1. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
    2. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    3. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    4. Hassler, John & Rodriguez Mora, Jose V. & Zeira, Joseph, 2002. "Inequality and Mobility," Working Paper Series rwp02-009, Harvard University, John F. Kennedy School of Government.
    5. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November.
    6. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
    7. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
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