Inequality and Mobility

John Hassler (), José Vicente Rodríguez Mora and Joseph Zeira ()

No 2497, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a general equilibrium OLG model to analyse the relation between intergenerational social mobility and wage inequality. We show that the correlation between mobility and inequality depends on which factor caused the change in inequality. The model can thus help discriminate between different competing explanations of the recent rise in US wage inequality. Under reasonable assumptions, skill-biased technical change tends to increase upward mobility, thereby causing a positive correlation between wage inequality and mobility. Public subsidies to education reduce inequality, but the effect on mobility is ambiguous and depends on how well households with non-skilled parents can take advantage of the subsidy. The relation between subsidies and upward mobility is always concave in the short run and may also be so in the long run. Under some circumstances, the relationship between public support for education and mobility can follow an inverted U-pattern. The model can thus provide an explanation to different patterns of inequality and social mobility in Europe and the US.

Keywords: Educational Policy; Inequality; Intergenerational Mobility; Skill-Bias (search for similar items in EconPapers)
JEL-codes: H52 J62 (search for similar items in EconPapers)
Date: 2000-07
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Related works:
Working Paper: Inequality and Mobility (2002)
Working Paper: Inequality and Mobility (2007)
Journal Article: Inequality and mobility (2007)
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