Abstract
In the model of this paper children cannot make their own education decisions, because they cannot borrow to finance their education. Parents, however, care about children’s income, so, if the rate of return to education is higher than the rate of return to financial assets, parents will invest in their children’s education rather than pass on financial wealth. Under the assumptions that there is a stationary distribution of abilities, and that each parent knows his child’s ability, the authors are able to show that there is a stationary distribution of wealth. In equilibrium wealth inequality exists because more able children receive more education, and as a result accumulate more wealth.
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© 1981 Martinus Nijhoff Publishers, The Hague
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Pissarides, C.A. (1981). Comments on P. G. Hare and D. T. Ulph. In: Bowman, M.J. (eds) Collective Choice in Education. Studies in Public Choice. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-7398-5_11
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DOI: https://doi.org/10.1007/978-94-009-7398-5_11
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-009-7400-5
Online ISBN: 978-94-009-7398-5
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