On the dynamics of inequality

Debraj Ray

    Research output: Contribution to journalArticle

    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 languageEnglish (US)
    Pages (from-to)291-306
    Number of pages16
    JournalEconomic Theory
    Volume29
    Issue number2
    DOIs
    StatePublished - Oct 2006

    Keywords

    • Income distribution
    • Inequality
    • Intertemporal equilibrium

    ASJC Scopus subject areas

    • Economics and Econometrics

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