The paper explores the consequences for inequality of the joint evolution, endogenous or exogenous, of social connections and human capital investments. It allows for intergenerational transfers of both human capital and social networking endowments in dynamic and steady-state settings of a dynastic overlapping-generations model. Intergenerational transfer elasticities exhibit rich dependence on social effects. The dynamics of demographically increasingly complex models are shown to be tractable. The stochastic steady states of the human capital distribution are examined in the presence of shocks to underlying parameters that are interpreted as shocks to cognitive and non-cognitive skills.
Endogenous Social Networks and Inequality in an Intergenerational Setting
C21: Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
C23: Single Equation Models; Single Variables: Models with Panel Data; Longitudinal Data; Spatial Time Series
C31: Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
C35: Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
HCEO Working Groups:
Revised version, May, 2016