An Assignment Model of Knowledge Diffusion and Income Inequality

Erzo Luttmer

No 509, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those with more useful knowledge can teach others, with competitive markets assigning students to teachers. In equilibrium, students with an ability to learn quickly are assigned to teachers with the most productive knowledge. This sorting on ability implies large differences in earnings distributions conditional on ability, as shown using explicit formulas for the tail behavior of these distributions.

Keywords: Knowledge diffusion; Growth; Income inequality (search for similar items in EconPapers)
JEL-codes: J20 O10 O30 O40 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2015-03-27
New Economics Papers: this item is included in nep-dge, nep-knm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.minneapolisfed.org/research/sr/sr509.pdf Full text (application/pdf)

Related works:
Working Paper: An Assignment Model of Knowledge Diffusion and Income Inequality (2015)
Working Paper: An Assignment Model of Knowledge Diffusion and Income Inequality (2014)
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: https://EconPapers.repec.org/RePEc:fip:fedmsr:509

Access Statistics for this paper

More papers in Staff Report from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().