The Evolution Of Wealth Distribution In A Model Of Educational Investment With Heterogenous Agents
The implications of individual heterogeneity for the evolution of wealth distribution are studied in a standard model of occupational choice with financial market imperfections and local non convexities in education investment technology. The authors consider heterogeneity in the cost of educational investment, interpreted as genetic variation at the level of lineage. Ergodicity of the wealth distribution is obtained whenever the (exogenous) distribution of education costs entails the presence of ability types for which the educational investment is inefficient vis a vis financial investment, regardless of how "Large" the support is. Conversely, poverty traps can emerge only if investment is efficient for every single agent in the economy.