 Income Inequality, Mobility, and the Accumulation of CapitalCecilia Garcia-Penalosa and Stephen J Turnovsky Post-Print from HAL Abstract: We examine the determinants of income mobility and inequality in a Ramsey model with elastic labor supply and heterogeneous wealth and ability (labor endowment). Both agents with lower wealth and with greater ability tend to supply more labor, implying that labor supply decisions may have an equalizing or unequalizing effect depending on the relative importance of the two sources of heterogeneity. Moreover, these decisions are central to the extent of mobility observed in an economy. The relationship between mobility and inequality is complex. For example, a reduction in the interest rate and an increase in the wage rate reduce capital income inequality and allow upward mobility of the ability-rich. However, the increase in the labor supply of high ability agents in response to higher wages raises earnings dispersion and thus has an offsetting effect. As a result, high mobility can be associated with an increase or a decrease in overall income inequality. (This abstract was borrowed from another version of this item.) Keywords: endogenous labour supply; Income mobility; Inequality; Transitional dynamics. (search for similar items in EconPapers) Published in Macroeconomic Dynamics, 2015, 19 (06), pp.1332--1357. ⟨10.1017/S1365100513000850⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01456128 DOI: 10.1017/S1365100513000850 Access Statistics for this paper More papers in Post-Print from HAL |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.