Economics at your fingertips  

Perceptions, biases, and inequality

Dyotona Dasgupta and Anuradha Saha

Journal of Economic Behavior & Organization, 2022, vol. 202, issue C, 198-210

Abstract: This paper introduces perceived self-efficacy beliefs in an overlapping generations model and studies the effects of behavioral anomalies on human capital investments and aggregate inequality. These beliefs are not inherent but based on a person’s socio-economic background. Ex ante children are homogeneous, but parents are biased about the returns to their children’s education. Based on parental education and job status, parents may be over or under confident but otherwise, they are rational. We witness spillover effects that shift the incentives to educate children from the pessimistic parents to unbiased parents. Biases may induce or hinder investment. Over investment by one parent type may even crowd-out investments of other parent types. We find interesting effects of biases on the aggregate economy when parental warm glow is not low.

Keywords: Behavioral inequality; Human capital investment; Behavioral bias; Intergenerational mobility (search for similar items in EconPapers)
JEL-codes: D91 E2 J62 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Perception, Biases and Inequality (2021) Downloads
Working Paper: The Glasses are Tinted: Self-Confidence and Poverty Trap (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jebo.2022.08.003

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-08-09
Handle: RePEc:eee:jeborg:v:202:y:2022:i:c:p:198-210