Is Equality Stable?
- 1 April 2002
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 92 (2) , 253-259
- https://doi.org/10.1257/000282802320189357
Abstract
We explore conditions under which the market mechanism has an innate tendency to generate and perpetuate inequality, in an overlapping generation context where parents choose how much to spend on their children's education, in addition to (nonnegative) nancial bequests. A necessary and sucien t condition for existence of equal steady states is obtained, which relates the strength of the bequest motive to the extent of occupational diversity, wage levels and growth rates. In the absence of indivisibilities in investment (i.e., there is a continuum of occupations) the steady state is unique. We then describe examples of dynamic trajectories where starting from perfect equality, inequality eventually emerges and persists.Keywords
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