TY - JOUR

T1 - Persistent inequality

AU - Mookherjee, Dilip

AU - Ray, Debraj

N1 - Funding Information:
Just as in Case 1, we may now construct a Pareto-dominating path. Consider the sequence of production plans (ZE, z~, Z, Z, ...), where 0 < E < min{E3'E4}. By (A.26) and (A.27), such a path is (technologically) feasible. Relative to the steady state, this path displays an aggregate consumption surplus of yE in period 0 and no difference thereafter. Divide this surplus equally among all date-O agents. Clearly, a Pareto-improvement has taken place, and the proof is complete. II Acknowledgements. We thank Abhijit Banerjee, Michael Kremer, Glenn Loury, Andy Newman and Rajiv Vohra for helpful discussions, and seminar participants at Columbia, Harvard and the July 2000 NBER Income Distribution workshop for their comments. An Editor and two anonymous referees provided helpful comments on an earlier draft. This research was supported by the National Science Foundation (NSF grant No. SBS-9709254), and Mookherjee was additionally funded by the MacArthur Foundation.

PY - 2003/4

Y1 - 2003/4

N2 - When human capital accumulation generates pecuniary externalities across professions, and capital markets are imperfect, persistent inequality in utility and consumption is inevitable in any steady state. This is true irrespective of the degree of divisibility in investments. However, divisibility (or fineness of occupational structure) has implications for both the multiplicity and Pareto-efficiency of steady states. Indivisibilities generate a continuum of inefficient and efficient steady states with varying per capita income. On the other hand, perfect divisibility typically implies the existence of a unique steady state distribution which is Pareto-efficient.

AB - When human capital accumulation generates pecuniary externalities across professions, and capital markets are imperfect, persistent inequality in utility and consumption is inevitable in any steady state. This is true irrespective of the degree of divisibility in investments. However, divisibility (or fineness of occupational structure) has implications for both the multiplicity and Pareto-efficiency of steady states. Indivisibilities generate a continuum of inefficient and efficient steady states with varying per capita income. On the other hand, perfect divisibility typically implies the existence of a unique steady state distribution which is Pareto-efficient.

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U2 - 10.1111/1467-937X.00248

DO - 10.1111/1467-937X.00248

M3 - Article

AN - SCOPUS:0038474307

SN - 0034-6527

VL - 70

SP - 369

EP - 393

JO - Review of Economic Studies

JF - Review of Economic Studies

IS - 2

ER -