Social Mobility And Preferences For Open Access Societies

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.