Inequality and Mobility

43 Pages Posted: 19 Jun 2002

See all articles by John Hassler

John Hassler

Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

José Vincente Rodríguez Mora

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Joseph Zeira

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); LUISS Guido Carli, DPTEA

Date Written: January 2002

Abstract

We construct a model where wage inequality, intergenerational mobility and the distribution of skills are all jointly determined in general equilibrium, which is solved analytically. We show that it is important to treat these variables jointly, as they have a significant effect on each other. The model is used to understand both empirical regularities and policy implications. The main result of the paper is that changes in education, including public education, lead to a negative correlation between inequality and upward mobility, while changes in productivity tend to lead to a positive correlation between inequality and upward mobility. Hence, the observations that some European countries tend to be more equal but less socially mobile than the US, cannot be attributed to differences in public support to education, but rather to differences in productivity. Another result of the paper is that while public support to education benefits children of poor parents, it benefits children of skilled and rich parents by even more, improving their relative chances of success. Since parents care about their children, general public support to education can then increase the difference in welfare between skilled and non-skilled individuals, notwithstanding a reduction in wage inequality.

Keywords: Economics - Macroeconomics, Education Policy

Suggested Citation

Hassler, John and Rodríguez Mora, José Vincente and Zeira, Joseph, Inequality and Mobility (January 2002). Available at SSRN: https://ssrn.com/abstract=316504 or http://dx.doi.org/10.2139/ssrn.316504

John Hassler

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 816 2070 (Phone)
+46 816 1443 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

José Vincente Rodríguez Mora

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 1755 (Phone)
+34 93 542 1746 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Joseph Zeira (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem 91905, Jerusalem 91905
Israel
+972 2 588 3256 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

LUISS Guido Carli, DPTEA ( email )

viale Pola 12
Roma, Roma 00198
Italy

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