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Ability, Education, and Income Inequality

Buly Cardak ()

Journal of Public Economic Theory, 2004, vol. 6, issue 2, 239-276

Abstract: A model of education where the distribution of abilities is the source of heterogeneity is investigated. Ability is a key determinant of human capital accumulated when young, which in turn determines income and its distribution. The assumption of heterogeneous abilities leads to steady-state income distributions that exhibit income inequality. Of particular interest is the result that symmetric distributions of ability generate positively skewed income distributions. Models of private and public education are analyzed and compared. It is found that private education results in higher incomes and less income inequality than observed in the public education model. Copyright 2004 Blackwell Publishing Inc..

Date: 2004
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Handle: RePEc:bla:jpbect:v:6:y:2004:i:2:p:239-276