Inequality and mobility

Abstract

Acknowledging that wage inequality and intergenerational mobility are strongly interrelated, this paper presents a model in which both are jointly determined. The model enables us to study how inequality and mobility are affected by exogenous changes and what determines their correlation. A main implication of the model is that differences in the amount of public subsidies to education and educational quality produce cross-country patterns with a negative correlation between inequality and mobility. Differences in the labor market, like differences in skill-biased technology or wage compression instead produce a positive correlation. The predictions of the model are found to be consistent with various empirical observations on mobility and inequality.

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Correspondence to John Hassler.

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Hassler, J., Rodríguez Mora, J.V. & Zeira, J. Inequality and mobility. J Econ Growth 12, 235–259 (2007). https://doi.org/10.1007/s10887-007-9019-x

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Keywords

  • Intergenerational mobility
  • Inequality
  • Educational policy