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Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information

Gabrieli, T; (2012) Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information. The Journal of Economic Asymmetries , 9 (1) pp. 23-49. 10.1016/j.jeca.2012.01.002. Green open access

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Abstract

This paper presents a dynamic model to study how different levels of information about the root determinants of wealth (luck versus effort) can impact inequality and intergenerational mobility through societal beliefs, individual choices and redistributive policies. To my knowledge, the model presented is the first dynamic model in which skills are stochastic and both beliefs and voted redistribution are determined endogenously. The model is able to explain a number of empirical facts. Large empirical evidence shows that the difference in the political support for redistribution appears to reflect differences in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. Moreover the beliefs about the determinants of wealth impact individual choices of effort and therefore the beliefs about the determinants of wealth impact inequality and mobility both through choices of effort and redistributive policies. The model generates multiple equilibria (US versus Europe-type) which may account for the observed features not only in terms of societal beliefs and redistribution but also in terms of perceived versus real mobility and inequality.

Type: Article
Title: Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jeca.2012.01.002
Publisher version: http://dx.doi.org/10.1016/j.jeca.2012.01.002
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Politico-Economic Equilibria; Redistribution; Inequality; Intergenerational Mobility; Incomplete Information
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > The Bartlett School of Planning
URI: https://discovery.ucl.ac.uk/id/eprint/1477032
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