Aspirations and Inequality

Garance Genicot and Debraj Ray

No 19976, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a theory of socially determined aspirations, and the interaction of those aspirations with growth and inequality. The interaction is bidirectional: economy-wide outcomes determine individual aspirations, which in turn determine investment incentives and social outcomes. Thus aspirations, income and the distribution of income evolve jointly. When capital stocks lie in some compact set, steady states distributions must exhibit inequality and are typically clustered around local poles. When sustained growth is possible, initial histories matter. Either there is convergence to an equal distribution (with growth) or there is perennial relative divergence across clusters, with within-cluster convergence. A central feature that drives these results is that aspirations that are moderately above an individual’s current standard of living tend to encourage investment, while still higher aspirations may lead to frustration.

JEL-codes: D9 J62 O15 O40 (search for similar items in EconPapers)
Date: 2014-03
Note: DEV
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Genicot, G. and Ray, D. (2017), Aspirations and Inequality. Econometrica, 85: 489-519. doi:10.3982/ECTA13865

Downloads: (external link)
http://www.nber.org/papers/w19976.pdf (application/pdf)

Related works:
Journal Article: Aspirations and Inequality (2017)
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:nbr:nberwo:19976

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19976

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().