On the dynamics of inequality

Debraj Ray

doi:10.1007/s00199-005-0021-2

On the dynamics of inequality

Debraj Ray

Research output: Contribution to journal › Article › peer-review

Abstract

The dynamics of inequality are studied in a model of human capital accumulation with credit constraints. This model admits a multiplicity of steady state skill ratios that exhibit varying degrees of inequality across households. The main result studies equilibrium paths. It is shown that an equilibrium sequence of skill ratios must converge monotonically to the smallest steady state that exceeds the initial ratio for that sequence. Convergence is "gradual" in that the steady state is not achieved in finite time. On the other hand, if the initial skill ratio exceeds the largest steady state, convergence to a steady state is immediate.

Original language	English (US)
Pages (from-to)	291-306
Number of pages	16
Journal	Economic Theory
Volume	29
Issue number	2
DOIs	https://doi.org/10.1007/s00199-005-0021-2
State	Published - Oct 2006

Keywords

Income distribution
Inequality
Intertemporal equilibrium

ASJC Scopus subject areas

Economics and Econometrics

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10.1007/s00199-005-0021-2

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AB - The dynamics of inequality are studied in a model of human capital accumulation with credit constraints. This model admits a multiplicity of steady state skill ratios that exhibit varying degrees of inequality across households. The main result studies equilibrium paths. It is shown that an equilibrium sequence of skill ratios must converge monotonically to the smallest steady state that exceeds the initial ratio for that sequence. Convergence is "gradual" in that the steady state is not achieved in finite time. On the other hand, if the initial skill ratio exceeds the largest steady state, convergence to a steady state is immediate.

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KW - Inequality

KW - Intertemporal equilibrium

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On the dynamics of inequality

Abstract

Keywords

ASJC Scopus subject areas

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