Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252197 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15073
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We analyze how intergenerational mobility and inequality would change relative to the status quo if dynasties had access to optimal insurance against low ability of future generations. Based on a dynamic, dynastic Mirrleesian model, we find that insurance against intergenerational ability risk increases in the social optimum relative to the status quo. This implies less intergenerational mobility in terms of welfare but no quantitatively significant change in earnings mobility. Earnings mobility is thus similar across economies with different incentives and welfare, illustrating that changes in earnings mobility cannot be interpreted readily in welfare terms without further analysis.
Subjects: 
asymmetric information
intergenerational mobility
inequality
human capital
schooling
bequests
JEL: 
E24
H21
I24
J24
J62
Document Type: 
Working Paper

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