Efficiency of screening and labor income inequality

Eckwert B, Zilcha I (2008)
JOURNAL OF PUBLIC ECONOMIC THEORY 10(1): 77-98.

Journal Article | Published | English

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We analyze the importance of information about individual skills for understanding human capital accumulation and income inequality. The paper uses the framework of an overlapping generations economy with endogenous investment in human capital. Agents in each generation differ by random individual ability, or talent, which affects the screening process. The human capital of an agent depends on both his talent and his investment in education. The investment decision is based on a public signal (test outcome), which screens all agents for their talents. We analyze how a better information system, which allows more efficient screening, affects investment in education and, hence, income inequality in equilibrium. As a main result, we find that, typically, less inequality in the distribution of actual incomes can only be achieved at the expense of more inequality in the distribution of income opportunities.
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Eckwert B, Zilcha I. Efficiency of screening and labor income inequality. JOURNAL OF PUBLIC ECONOMIC THEORY. 2008;10(1):77-98.
Eckwert, B., & Zilcha, I. (2008). Efficiency of screening and labor income inequality. JOURNAL OF PUBLIC ECONOMIC THEORY, 10(1), 77-98.
Eckwert, B., and Zilcha, I. (2008). Efficiency of screening and labor income inequality. JOURNAL OF PUBLIC ECONOMIC THEORY 10, 77-98.
Eckwert, B., & Zilcha, I., 2008. Efficiency of screening and labor income inequality. JOURNAL OF PUBLIC ECONOMIC THEORY, 10(1), p 77-98.
B. Eckwert and I. Zilcha, “Efficiency of screening and labor income inequality”, JOURNAL OF PUBLIC ECONOMIC THEORY, vol. 10, 2008, pp. 77-98.
Eckwert, B., Zilcha, I.: Efficiency of screening and labor income inequality. JOURNAL OF PUBLIC ECONOMIC THEORY. 10, 77-98 (2008).
Eckwert, Bernhard, and Zilcha, Itzhak. “Efficiency of screening and labor income inequality”. JOURNAL OF PUBLIC ECONOMIC THEORY 10.1 (2008): 77-98.
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