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Intergenerational Mobility and Reference Groups

Author

Listed:
  • Martín Leites

    (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

  • Xavier Ramos

    (Universitat Autònoma de Barcelona. Departament d'Economia Aplicada)

Abstract

We model the role of reference groups as a mechanism for inequality persistence across generations. Reference group theory suggests that culturally shaped processes alter individuals'ambition. As a result, relative deprivatione effects may discourage (encourage) low-background individuals from making adequate mobility-enhancing investments.The model confirmes that reference groups could be an inequality transmission mechanism across generations,and shows that both the size and direction of this effects depends on,(a)the composition of the reference group,(b)the intensity and functional form of income comparisons,(c)the ex-ante inequality between agents from different social origins and the reward of effort, and(d)the information about their peers and past income mobility. Our model is more general than previous models and its findings are in stark contrast to models based upon self-fulfilling beliefs and fatalistic predictions. Finally,our model explicitly links two strands of the literature: Reference group theory and aspiration failure models.

Suggested Citation

  • Martín Leites & Xavier Ramos, 2019. "Intergenerational Mobility and Reference Groups," Documentos de Trabajo (working papers) 19-23, Instituto de Economía - IECON.
    • Handle: RePEc:ulr:wpaper:dt-23-19
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    File URL: https://hdl.handle.net/20.500.12008/23040
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    References listed on IDEAS

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    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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