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  3. American Economic Journal: Microeconomics
  4. November 2010
  5. Inequality and Markets: Some Implications of Occupational Diversity

Inequality and Markets: Some Implications of Occupational Diversity

  • Dilip Mookherjee
  • Debraj Ray
American Economic Journal: Microeconomics
vol. 2, no. 4, November 2010
(pp. 38-76)
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Abstract

This paper studies income distribution in an economy with borrowing constraints. Parents leave both financial and educational bequests; these determine the occupational choices of children. Occupational returns are determined by market conditions. If the span of occupational investments is large, long-run wealth distributions display persistent inequality. With a "rich" set of occupations, so that training costs form an interval, the distribution is unique and the average return to education must rise with educational investment. This finding contrasts with the usual presumption of diminishing returns to human capital. It is the central testable proposition of this paper. (JEL D14, D31, J24)

Citation

Mookherjee, Dilip, and Debraj Ray. 2010. "Inequality and Markets: Some Implications of Occupational Diversity." American Economic Journal: Microeconomics, 2 (4): 38-76. DOI: 10.1257/mic.2.4.38

JEL Classification

  • D14 Personal Finance
  • D31 Personal Income, Wealth, and Their Distributions
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
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