Inequality and markets: Some implications of occupational diversity

Dilip Mookherjee, Debraj Ray

    Research output: Contribution to journalArticle

    Abstract

    This paper studies income distribution in an economy with borrowing constraints. Parents leave both financial and educational bequests; these determine the occupational choices of children. Occupational returns are determined by market conditions. If the span of occupational investments is large, long-run wealth distributions display persistent inequality. With a "rich" set of occupations, so that training costs form an interval, the distribution is unique and the average return to education must rise with educational investment. This finding contrasts with the usual presumption of diminishing returns to human capital. It is the central testable proposition of this paper. (JEL D14, D31, J24).

    Original languageEnglish (US)
    Pages (from-to)38-76
    Number of pages39
    JournalAmerican Economic Journal: Microeconomics
    Volume2
    Issue number4
    DOIs
    StatePublished - Nov 1 2010

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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