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Human Capital and Income Distribution Dynamics

  • Massimo Giannini

    (University of Rome "Tor Vergata")

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    The paper assumes a continuum of two period-lived agents; agents are identical except for the inherited income. Young agents optimally allocate their inherited income between consumption and investment in human capital in a stochastic environment. In the second period they receive a wage proportional to the accumulated human capital and invest in offspring. Two main results are provided: a low earning per unit of human capital leads the economy to converge to a stationary income distribution whatever the initial distribution. Viceversa, for a sufficently high wage an endogenous growth is at work and the income distribution dynamics depends on the initial conditions. In this case several redistributive policies are analized.

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    Paper provided by EconWPA in its series GE, Growth, Math methods with number 9802004.

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    Date of creation: 26 Feb 1998
    Date of revision:
    Handle: RePEc:wpa:wuwpge:9802004
    Note: Type of Document - PDF; prepared on IBM PC -; to print on HP;
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    1. Galor, Oded & Tsiddon, Daniel, 1997. " The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
    2. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
    3. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
    4. Daron Acemoglu, 1995. "Matching, Heterogeneity and the Evolution of Income Distribution," Working papers 95-25, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
    6. Atkinson, A. B., 1995. "Is the Welfare State necessarily an obstacle to economic growth?," European Economic Review, Elsevier, vol. 39(3-4), pages 723-730, April.
    7. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
    8. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
    9. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
    10. Persson, Torsten & Tabellini, Guido, 1992. "Growth, distribution and politics," European Economic Review, Elsevier, vol. 36(2-3), pages 593-602, April.
    11. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
    12. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
    13. Vaughan, R N, 1979. "Class Behaviour and the Distribution of Wealth," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 447-65, July.
    14. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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