[Topic] Endogenous Skills and Labor Income Inequality

[Abstract] How much does inequality in life depend on conditions established at age 18? What role does post-18 higher education play? I use an education choice model with exogenous conditions from family wealth, established human capital at age 18 and shocks to human capital to examine these questions. Family wealth and established human capital at age 18 determine the post-18 education choices. Education builds up human capital and reduces future earnings volatility. Absent this transmission channel, previous studies dramatically underestimate the importance of initial family wealth in explaining lifetime earnings inequality. My model finds that family wealth at age 18 explains up to 15% of lifetime earnings inequalities, and human capital at age 18 explains 72%. Policy counterfacutals that encourage college education by providing financial aid reduce inequality and improve welfare.

Time: 12:00-13:30, Wednesday, December 26, 2018

Location: Room 714, Mingde Main Building

Reporter: Yang Guanyi

Host: Zhang Jing

About the speaker: Assistant Professor, Department of Economics, St. Lawrance University, USA, PhD in Economics, Ohio State University, USA. His research interests include macroeconomics - Labor economics, income inequality, human capital, business cycle, etc.