Human capital and income distribution dynamics

Massimo Giannini

No 34, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: The paper assumes a continuum of two period-lived agents; agents are identical except for inherited income. Young agents allocate their inheritance between consumption and investment in human capital under uncertainty. In the second period they receive a wage proportional to the accumulated human capital and invest in offspring. Two main results arise: a low earning per unit of human capital leads economy to converge to a stationary income distribution whatever the initial distribution. Viceversa, for a sufficiently high wage an endogenous growth operates and the distributive dynamics depends on initial conditions. In this case different redistributive policies are analyzed.

Keywords: human capital accumulation; personal income distribution; diffusion processes; Fokker-Planck. (search for similar items in EconPapers)
JEL-codes: D31 D90 O15 O41 (search for similar items in EconPapers)
Pages: 45
Date: 1999-01
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