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Human Capital, Study Effort, and Persistent Income Inequality

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  • Chengze Simon Fan

Abstract

The paper shows that if an individual's cost of human capital accumulation depends on his parents’ human capital and there exists a “raw labor” sector of production, individuals with low parental human capital may devote little effort in study and become unskilled workers. Further, if an individual exerts little effort in study, the human capital he accumulated may be even less than his parents’. Consequently, his children will have even lower parental human capital than him and they will therefore also become unskilled. Thus, the model shows that even when education is free, income inequality can persist across generations.

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  • Chengze Simon Fan, 2003. "Human Capital, Study Effort, and Persistent Income Inequality," Review of Development Economics, Wiley Blackwell, vol. 7(2), pages 311-326, May.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:2:p:311-326
    DOI: 10.1111/1467-9361.00193
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    2. Simon Fan, C., 2008. "Religious participation and children's education: A social capital approach," Journal of Economic Behavior & Organization, Elsevier, vol. 65(2), pages 303-317, February.

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