We present a dynamic OLG model of educational signaling, inequality and mobility with missing credit markets. Agents are characterized by two sources of unobserved heterogeneity: ability and family income, consistent with empirical evidence on returns to schooling. Both quantity and quality of human capital evolve endogenously. The model generates a Kuznets inverted-U pattern in skill premia similar to historical US and UK experience. In the rst (resp. later) phase the skill premium rises (falls), social returns to education exceed (falls below) private returns: under-investment owing to nancial imperfections dominate (are dominated by) over-investment owing to signaling distortions. Public schooling provision which raises mobility by expanding educational opportunity of poor children also enhances eciency by improving matching of children ability with occupational choices. 1

Educational Signaling, Credit Constraints and Inequality Dynamics

D'AMATO, Marcello
2012

Abstract

We present a dynamic OLG model of educational signaling, inequality and mobility with missing credit markets. Agents are characterized by two sources of unobserved heterogeneity: ability and family income, consistent with empirical evidence on returns to schooling. Both quantity and quality of human capital evolve endogenously. The model generates a Kuznets inverted-U pattern in skill premia similar to historical US and UK experience. In the rst (resp. later) phase the skill premium rises (falls), social returns to education exceed (falls below) private returns: under-investment owing to nancial imperfections dominate (are dominated by) over-investment owing to signaling distortions. Public schooling provision which raises mobility by expanding educational opportunity of poor children also enhances eciency by improving matching of children ability with occupational choices. 1
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/20.500.12570/4923
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