Inequality and Markets: Some Implications of Occupational Diversity

Dilip Mookherjee and Debraj Ray

American Economic Journal: Microeconomics, 2010, vol. 2, issue 4, 38-76

Abstract: This paper studies income distribution in an economy with borrowing constraints. Parents leave both financial and educational bequests; these determine the occupational choices of children. Occupational returns are determined by market conditions. If the span of occupational investments is large, long-run wealth distributions display persistent inequality. With a "rich" set of occupations, so that training costs form an interval, the distribution is unique and the average return to education must rise with educational investment. This finding contrasts with the usual presumption of diminishing returns to human capital. It is the central testable proposition of this paper. (JEL D14, D31, J24)

JEL-codes: D14 D31 J24 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mic.2.4.38
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Citations: View citations in EconPapers (16)

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