Mobility, Inequality, and Growth: An Inverted-U Relationship
Economics Bulletin, 2020, vol. 40, issue 3, 2047-2057
Empirical studies show that income inequality and economic growth tend to have unclear relationship. To explain the mechanism, this paper presents a simple model in which mobility, inequality, and growth are endogenously determined. In our model, children decide whether or not to acquire education in response to the income transfer from the parent, the each individual's own ability to learn, the wage inequality between educated workers and uneducated workers, and the family background. Their education accumulates knowledge capital that is the driving force of the economic growth. We analytically demonstrate that the inequality has an inverted-U relation with the growth rate through the acceleration of upward mobility.
Keywords: Social mobility; Income inequality; Education (search for similar items in EconPapers)
JEL-codes: I2 J2 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-20-00459
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