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American Economic Review Vol. 101 No. 7 2011

Sources of Lifetime Inequality

Mark Huggett1; Gustavo Ventura2; Amir Yaron3

1 Department of Economics, Georgetown University, 576 ICC, 37th and O Streets, Washington, D.C. 20057-1036. · 2 Department of Economics, Arizona State University, Tempe, AZ, 85287-9801. · 3 Department of Finance, The Wharton School, University of Pennsylvania, 2325 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA, 19104.

Abstract

Is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth, and lifetime utility than do differences in shocks received over the working lifetime.

DOI
10.1257/aer.101.7.2923
Volume
101
Issue
7
Pages
2923-2954
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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