INTERGENERATIONAL EARNINGS MOBILITY, INEQUALITY AND GROWTH

We examine a model in which per capita income, inequality, intergenera tional mobility, and returns to education are all determined endogenou sly. Individuals earn wages depending on their ability, which is a ran dom variable. They purchase an education with transfers received from their parents, and are subject to liquidity constraints. In the model, multiple steady-state equilibria are possible: countries with identic al tastes and technologies can reach differing rates of mobility, ineq uality and per capita income. Equilibria with higher levels of output also have lower inequality, higher mobility, and more efficient distri bution of education. (C) 1998 Elsevier Science B.V. All rights reserve d.