Abstract
This study investigates a dynamic political economy model that provides a link between the intensity of social mobility in society and the barriers to entry on markets in modern democracies. We use overlapping generation model in which all agents are divided by three groups: unskilled workers, skilled workers and capitalists. Social mobility is determined by the parental endogenous education decision and by the level of barriers to entry on markets, which is a political outcome. We show that a majority of voters may support high barriers to entry if perspectives of upward mobility for high-skilled workers is sufficiently low for every institutional set-up and there are direct payments from incumbent capitalists to a group of unskilled workers. This outcome also leads to persistently lower social mobility for every social group and to a lower level of education in the society. The model provides a theoretical justification of the empirical evidence, suggesting that a higher level of economic inequality is associated with a lower quality of economic institutions in democracies.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.