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Persistent Inequality

Author

Listed:
  • Dilip Mookherjee

    (Institute for Economic Development, Boston University)

  • Debraj Ray

    (Department of Economics, New York University)

Abstract

When human capital accumulation generates pecuniary externalities across professions, and capital markets are imperfect, persistent inequality in utility and consumption is inevitable in any steady state. This is true irrespective of the degree of divisibility in investments. However, divisibility (or fineness of occupational structure) has implications for both the multiplicity and Pareto-efficiency of steady states. Indivisibilities generate a continuum of inefficient and efficient steady states with varying per capita income On the other hand, perfect divisibility typically implies the existence of a unique steady state distribution which is Pareto-efficient.

Suggested Citation

  • Dilip Mookherjee & Debraj Ray, 2000. "Persistent Inequality," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-108, Boston University - Department of Economics, revised Oct 2002.
    • Handle: RePEc:bos:iedwpr:dp-108
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    File URL: http://people.bu.edu/dilipm/publications/MookRayRES2003.pdf
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    References listed on IDEAS

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