Intergenerational Mobility and Macroeconomic History Dependence

Dilip Mokherjee () and Stefan Napel ()
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Dilip Mokherjee: Department of Economics, Boston University

No 1, Discussion Papers from Aboa Centre for Economics

Abstract: That historical inequality can affect long run macroeconomic performance has been argued by a large literature on ‘endogenous inequality’ using models of indivisibilities in occupational choice, in the presence of borrowing constraints. These models are characterized by a continuum of steady states, and absence of mobility in any steady state. We augment such a model with heterogeneity in agents’ abilities in order to generate occupational mobility in steady state. Steady states with mobility are shown to be generically locally unique and finite in number. We provide forms of heterogeneity for which steady state is globally unique, and others where they are non-unique. Agent heterogeneity may also cause competitive equilibrium dynamics to fail to converge, but convergence can be restored in the presence of sufficient ‘inertia’ or occupation switching costs.

Keywords: Intergenerational mobility; occupational choice; human capital; borrowing constraints; inequality; history-dependence (search for similar items in EconPapers)
JEL-codes: D31 D91 E25 I21 J24 O11 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: Written 2006-03
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Related works:
Journal Article: Intergenerational mobility and macroeconomic history dependence (2007)
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