Persistent Inequality

Dilip Mookherjee and Debraj Ray

No dp-108, Boston University - Department of Economics - The Institute for Economic Development Working Papers Series from Boston University - Department of Economics

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.

Pages: 25 pages
Date: 2000-09, Revised 2002-10
New Economics Papers: this item is included in nep-ltv and nep-upt
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Citations: View citations in EconPapers (8)

Published, Review of Economic Studies (2003) 70, 269-293

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http://people.bu.edu/dilipm/publications/MookRayRES2003.pdf (application/pdf)

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Journal Article: Persistent Inequality (2003)
Working Paper: Persistent Inequality (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:bos:iedwpr:dp-108

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