Intergenerational Earnings Mobility, Inequality, and Growth
57 Pages Posted: 9 Jun 2000 Last revised: 6 Oct 2010
Date Written: June 1997
We examine a model in which per capita income, inequality, intergenerational mobility, and returns to education are all determined endogenously. Individuals earn wages depending on their ability, which is a random variable. They purchase an education with transfers received from their parents, and are subject to liquidity constraints. In the model, multiple steady state equilibria are possible: countries with identical tastes and technologies can reach differing rates of mobility, inequality, and per capita income. Equilibria with higher levels of output also have lower inequality, higher mobility, and more efficient distribution of education.
Suggested Citation: Suggested Citation