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A Model of Educational Investments, Social Concerns and Inequality

Andrea Gallice () and Edoardo Grillo

No 405, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We consider a model in which educational investments entail productivity gains, sig- naling power, and social status. The latter depends on the agent's relative achievement in one of three dimensions: (i) innate skills, (ii) level of schooling, and (iii) income. We study the three scenarios separately and characterize the conditions under which social concerns increase or decrease educational and income inequality. Inequality increases (decreases) if education lowers the stigma suffered by low skilled workers less (more) than it boosts the prestige enjoyed by high skilled workers. We discuss the expected results of some policies in light of these findings.

Keywords: education; signaling; social status; inequality. (search for similar items in EconPapers)
JEL-codes: D03 D10 I20 I21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu
Date: 2015, Revised 2018
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