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Aspirations and inequality

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Genicot, Garance and Ray, Debraj (2017) Aspirations and inequality. Econometrica, 85 (2). pp. 489-519. doi:10.3982/ECTA13865

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Official URL: http://dx.doi.org/10.3982/ECTA13865

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Abstract

This paper develops a theory of socially determined aspirations, and the interaction of those aspirations with growth and inequality. The interaction is bidirectional: economy-wide outcomes determine individual aspirations, which in turn determine investment incentives and social outcomes. Thus aspirations, income, and the distribution of income evolve jointly. When capital stocks lie in some compact set, steady state distributions must exhibit inequality and are typically clustered around local poles. When sustained growth is possible, initial histories matter. Either there is convergence to an equal distribution (with growth) or there is perennial relative divergence across clusters, with within-cluster convergence. A central feature that drives these results is that aspirations that are moderately above an individual's current standard of living tend to encourage investment, while still higher aspirations may lead to frustration.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Income distribution, Equality, Level of aspiration
Journal or Publication Title: Econometrica
Publisher: Blackwell Publishing
ISSN: 0012-9682
Official Date: 21 March 2017
Dates:
DateEvent
21 March 2017Published
21 December 2016Accepted
Volume: 85
Number: 2
Page Range: pp. 489-519
DOI: 10.3982/ECTA13865
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
SES-1261560 National Science Foundationhttp://dx.doi.org/10.13039/100000001
SES-1629370National Science Foundationhttp://dx.doi.org/10.13039/100000001

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