Opportunity and Inequality Across Generations

82 Pages Posted: 20 Feb 2020

See all articles by Winfried Koeniger

Winfried Koeniger

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics; Swiss Finance Institute

Carlo Zanella

University of Zurich - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

We analyze how intergenerational mobility and inequality would change relative to the status quo if dynasties had access to optimal insurance against low ability of future generations. Based on a dynamic, dynastic Mirrleesian model, we find that insurance against intergenerational ability risk increases in the social optimum relative to the status quo. This implies less intergenerational mobility in terms of welfare but no quantitatively significant change in earnings mobility. Earnings mobility is thus similar across economies with different incentives and welfare, illustrating that changes in earnings mobility cannot be interpreted readily in welfare terms without further analysis.

Keywords: human capital, schooling, bequests, asymmetric information, intergenerational mobility, inequality

JEL Classification: E240, H210, I240, J240, J620

Suggested Citation

Koeniger, Winfried and Zanella, Carlo, Opportunity and Inequality Across Generations (2020). CESifo Working Paper No. 8099, Available at SSRN: https://ssrn.com/abstract=3541447 or http://dx.doi.org/10.2139/ssrn.3541447

Winfried Koeniger (Contact Author)

University of St. Gallen ( email )

Swiss Institute for Empirical Economic Research
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St.Gallen, CH-9000
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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Center for Financial Studies (CFS) ( email )

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IZA Institute of Labor Economics ( email )

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Swiss Finance Institute ( email )

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Carlo Zanella

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

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