Working Paper: NBER ID: w7508
Authors: Raquel Fernández; Richard Rogerson
Abstract: Many social commentators have raised concerns over the possibility that increased sorting in a society can lead to greater inequality. To investigate this we construct a dynamic model of intergenerational education acquisition, fertility, and marital sorting and parameterize the steady state to match several basic empirical findings. Contrary to Kremer's (1997) finding of a basically insignificant effect of marital sorting on inequality, we find that increased marital sorting will significantly increase income inequality. Three factors are central to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children's years of education, and wages that are sensitive to the relative supply of skilled workers.
Keywords: sorting; inequality; education; marital sorting
JEL Codes: D31; J12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher fertility in lower-educated families (J13) | fewer skilled children (J24) |
| increased parental education (I24) | decreasing marginal effect on children's years of education (I21) |
| increase in skilled population (J24) | affects wage distribution (J31) |
| increased marital sorting (J12) | increase in income inequality (D31) |
| increased marital sorting (J12) | tighter borrowing constraints for low-income families (G51) |
| tighter borrowing constraints for low-income families (G51) | increase in income inequality (D31) |