Persistent inequality

Dilip Mookherjee, Debraj Ray

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)369-393
    Number of pages25
    JournalReview of Economic Studies
    Volume70
    Issue number2
    DOIs
    StatePublished - Apr 2003

    ASJC Scopus subject areas

    • Economics and Econometrics

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