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The inheritance of Advantage

  • Jose Rodriguez Mora

    (University of Edinburgh)

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://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
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
  2. John Hassler & José Rodríguez Mora & Joseph Zeira, 2007. "Inequality and mobility," Journal of Economic Growth, Springer, vol. 12(3), pages 235-259, September.
  3. Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers 3, Boston University - Department of Economics.
  4. Patrick J. Bayer & Peter Arcidiacono & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," Working Papers 10-51, Duke University, Department of Economics.
  5. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
  6. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
  7. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
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