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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
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 | |||||||||
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| 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: |
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| 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: |
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