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Occupational Diversity and Endogenous Inequality

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Author Info
Dilip Mookherjee () (Department of Economics, Boston University)
Debraj Ray () (New York University and Instituto de An´alisis Econ´omico (CSIC))

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Abstract

A traditional view of markets is that they equalize wealth across individuals. A more recent literature suggests that markets are inherently disequalizing. A third viewpoint argues that initial history is crucial in determining whether inequalities persist or not. By constructing a theory of equilibrium investment allocation between human capital and financial assets in the presence of borrowing constraints, we address these views in a unified way. Two attributes of occupational diversity turn out to be central to our understanding: span, the range of training costs across occupations, and richness, the variety of different training costs contained within the span. The former is used to generate a necessary and sufficient condition for markets to be disequalizing, while the latter is shown to be directly connected to the question of history-dependence.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2005-022.

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Length: 37 pages
Date of creation: Jun 2005
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Handle: RePEc:bos:wpaper:wp2005-022

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  4. Dilip Mookherjee & Debraj Ray, 2003. "Persistent Inequality," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 369-393, 04. [Downloadable!] (restricted)
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  8. Dilip Mookherjee & Debraj Ray, 2002. "Is Equality Stable?," American Economic Review, American Economic Association, vol. 92(2), pages 253-259, May. [Downloadable!]
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  1. Guido Cozzi & Fabio Privileggi, 2009. "The fractal nature of inequality in a fast growing world: new version," Working Papers 2009_30, Department of Economics, University of Glasgow. [Downloadable!]
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