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Marcello D'Amato, Salerno U. Print
Friday, 24 February 2012, 12:15 - 13:15

Marcello D'Amato, Salerno University

Educational Signaling, Credit Constraints and Inequality Dynamics

Abstract: We present a dynamic OLG model of educational signaling and inequality with missing credit markets. Agents are characterized by two sources of unobserved heterogeneity: ability and parental 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. There always exist Pareto-improving policy interventions reallocating education between poor and rich children.

Location: R42.2.113
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it