Open access
Datum
2016-03Typ
- Working Paper
ETH Bibliographie
yes
Altmetrics
Abstract
We investigate the effect of higher education on the evolution of inequality. In so doing we propose a novel overlapping generations model with three social classes: the rich, the middle class, and the poor. We show that there is an initial phase in which no social class invests in higher education of their children, such that the evolution of inequality is entirely driven by the level of bequests. Once a certain income threshold is surpassed, the rich start to invest in higher education of their children, which partially crowds out bequests and thereby reduces inequality in the short run. The better educated children of the rich, however, enjoy higher incomes and inequality starts to rise again. As time goes by, the middle class and eventually also the poor start to invest in higher education, but now the increase in inequality is driven by different levels of education. As the economy proceeds toward a balanced growth path, educational differences between social groupsand thus inequality decline again. We argue that (1) the proposed mechanism has the potential to explain the U-shaped evolution of inequality in rich countries in the second half of the 20th Centuryand the first decade of the 21st Century and (2) the currently observed increase in inequality is rather a transitory phenomenon. Mehr anzeigen
Persistenter Link
https://doi.org/10.3929/ethz-a-010613896Publikationsstatus
publishedZeitschrift / Serie
Economics Working Paper SeriesBand
Verlag
ETH Zurich, Center of Economic Research (CER-ETH)Thema
Higher education; Inequality; Piketty curve; Growth regime switch; Middle income trapOrganisationseinheit
02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
ETH Bibliographie
yes
Altmetrics