Peer Effects and the Promise of Social Mobility: A Model of Human Capital Investment
I analyze a model of human capital development in the presence of peer effects. Parents invest in their child, and this investment conveys a positive externality upon the child’s peers. Parents also acquire wealth, which i) finances consumption, and ii) determines a child’s peer group. I show how the freedom to compete for desirable peers exacerbates the natural underinvestment problem. The analysis thereby produces a general equilibrium framework in which the inefficiencies displayed in a rat-race interact with those stressed in the multi-tasking literature. I consider an extension in which both wealth and parental investment are observed with noise.
|Date of creation:||May 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Australian School of Business Building, Sydney 2052|
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
When requesting a correction, please mention this item's handle: RePEc:swe:wpaper:2010-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabriele Gratton)
If references are entirely missing, you can add them using this form.