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Intergenerational Mobility under Education-Effort Complementarity

Jaime Alonso-Carrera (), Jordi Caballe () and Xavier Raurich ()

No 2016/351, UB Economics Working Papers from Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics

Abstract: In this paper, we build a model that, according to the empirical evidence, gives raise to oscillations in wealth within a dynasty while keeping intergenerational persistence in education attainment. The mechanism that we propose is based on the interaction between effort and wealth suggested by the Carnegie effect, according to which wealthier individuals make less effort than the poorer. The oscillations in wealth arise from changes in the effort exerted by different generations as a response to both inherited wealth and college premium. Our mechanism generates a rich social stratification with several classes in the long run as a consequence of the combination of different levels of education and effort. Furthermore, we generate a large mobility in wealth among classes even in the long run. Our model highlights the role played by the minimum cost on education investment, the borrowing constraints, and the complementarity between effort and education.

Keywords: Intergenerational Mobility; Education; Effort. (search for similar items in EconPapers)
JEL-codes: I24 J62 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016
New Economics Papers: this item is included in nep-edu
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