IDEAS home Printed from https://ideas.repec.org/p/sal/celpdp/0119.html
   My bibliography  Save this paper

The Evolution of Wealth Distribution in a Model of Educational Investment with Heterogenous Agents

Author

Listed:
  • D'AMATO, Marcello

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

  • DI PIETRO, Christian

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

Abstract

The implications of individual heterogeneity for the evolution of wealth distribution are studied in a standard model of occupational choice with financial market imperfections and local non convexities in education investment technology. We consider heterogeneity in the cost of educational investment, interpreted as genetic variation at the level of lineage. Ergodicity of the wealth distribution is obtained whenever the (exogenous)distribution of education costs entails the presence of ability types for which the educational investment is inefficient vis a vis financial investment, regardless of how ”large” the support is. Conversely, poverty traps can emerge only if investment is efficient for every single agent in the economy. We show that under quite general conditions, the accumulation of wealth at the lineage level does not eliminate financial market imperfections over the long run, motivating our exploration of policy implications. In particular heterogeneity requires more persitent policies to achieve similar results as in the standard case. On the other hand policies can be effective in environments where they would fail under the assumption of homogeneous costs.

Suggested Citation

  • D'AMATO, Marcello & DI PIETRO, Christian, 2011. "The Evolution of Wealth Distribution in a Model of Educational Investment with Heterogenous Agents," CELPE Discussion Papers 119, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    • Handle: RePEc:sal:celpdp:0119
    as

    Download full text from publisher

    File URL: https://www.celpe.unisa.it/uploads/rescue/784/1048/119_dp.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    intergenerational mobility; inequality dynamics; occupational choice; educational investment; borrowing constraints;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sal:celpdp:0119. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roberto Dell'Anno (email available below). General contact details of provider: https://edirc.repec.org/data/cesalit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.