Abstract
We propose an overlapping generations model with three social classes to investigate the effects of higher education on the evolution of inequality. Initially, no social class invests in higher education and inequality is driven by wealth accumulation/bequests. Once the rich surpass a certain income threshold, they invest in higher education and theirchildren’s incomes start to grow faster. Over time, the middle class and potentially the poor follow suit. Overall, this framework provides a candidate explanation for i) the U-shaped evolution of income inequality, ii) the fall and rise of inheritance flows, and iii) differential investments in higher education.
| Original language | English |
|---|---|
| Pages (from-to) | 645-675 |
| Number of pages | 31 |
| Journal | The Scandinavian Journal of Economics |
| Volume | 123 |
| Issue number | 2 |
| Early online date | 17 Aug 2020 |
| DOIs | |
| Publication status | Published - 30 Apr 2021 |
Keywords
- Bequests
- differential education
- evolution of inequality
- growth regime switch
- human capital accumulation
ASJC Scopus subject areas
- Economics and Econometrics
Access to Document
- SJE_FINAL_19042020.PDF
This is the peer reviewed version of the following article: Prettner, K. and Schaefer, A. (2021), The U‐Shape of Income Inequality over the 20th Century: The Role of Education*. Scand. J. of Economics, 123: 645-675, which has been published in final form at https://doi.org/10.1111/sjoe.12424. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.