Working Paper: CEPR ID: DP5106
Authors: Matthias Doepke; Fabrizio Zilibotti
Abstract: We model the decision problem of a parent who chooses an occupation and invests in the patience of her children. The two choices complement each other: patient individuals choose occupations with a steep income profile; a steep income profile, in turn, leads to a strong incentive to invest in patience. In equilibrium, society becomes stratified along occupational lines. The most patient people are those in occupations requiring the most education and experience. The theory can account for the demise of the British land-owning aristocracy in the nineteenth century, when rich landowners proved unable to profit from new opportunities arising with industrialization, and were thus surpassed by industrialists rising from the middle classes.
Keywords: British aristocracy; capital accumulation; discount factor; income distribution; industrial revolution; patience
JEL Codes: N23; O14; O15; Z10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental investment in patience (D15) | Accumulation of patience capital (E22) |
| Accumulation of patience capital (E22) | Stratification into social classes (Z13) |
| Stratification into social classes (Z13) | Different preferences and occupational choices (J29) |
| Occupational choices (J29) | Accumulation of patience capital (E22) |
| Patient individuals (I11) | Choose professions with steeper income profiles (J44) |
| Financial market development (O16) | Class-based societies (P19) |
| Financial market development (O16) | Homogeneity in society (I24) |
| Decline of the British aristocracy (N93) | Inability to adapt to industrialization (N93) |
| Lower levels of patience (D91) | Economic decline of the British aristocracy (N93) |
| Higher levels of patience (G40) | Economic success of the rising middle class (N93) |