Occupational Diversity and Endogenous Inequality

Dilip Mookherjee and Debraj Ray

No WP2005-022, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: A traditional view of markets is that they equalize wealth across individuals. A more recent literature suggests that markets are inherently disequalizing. A third viewpoint argues that initial history is crucial in determining whether inequalities persist or not. By constructing a theory of equilibrium investment allocation between human capital and financial assets in the presence of borrowing constraints, we address these views in a unified way. Two attributes of occupational diversity turn out to be central to our understanding: span, the range of training costs across occupations, and richness, the variety of different training costs contained within the span. The former is used to generate a necessary and sufficient condition for markets to be disequalizing, while the latter is shown to be directly connected to the question of history-dependence.

Pages: 37 pages
Date: 2005-06
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Citations: View citations in EconPapers (2)

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Working Paper: OCCUPATIONAL DIVERSITY AND ENDOGENOUS INEQUALITY (2006)
Working Paper: Occupational Diversity and Endogenous Inequality (2005)
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