TY - UNPB
T1 - The Rise of Meritocracy and the Inheritance of Advantage
AU - Rodriguez Mora, Sevi
AU - Watts, Michael
PY - 2015/1/31
Y1 - 2015/1/31
N2 - We present a theoretical model that analyses jointly the roles of meritocracy, advantages and investment in the determination of the distribution of human capital and income, and in the intergenerational persistence of these processes. In the model parents invest in their children’s education, increasing their human capital. Firms observe this human capital with noise. In order to improve in their predictions of the quality of workers, they use any available information on their background, as they know that richer parents educate their children more. Thus, in equilibrium the income of an agent depends on both the objective information that society has on its human capital (that we deem “merit”) and the perceptions that society has on its background (that we deem as “advantages”). We show that the more meritocratic a society is (the better the quality of the information that firm have on individual’s human capital), the more parents invest in their children education. Nevertheless the increase in average income thus generated comes at the expense of a larger degree of income inequality and of a lower degree of intergenerational mobility. Moreover, it is even possible that the weight of inherited advantages increases, as the role of parental investment is known to be more important. Thus, from the point of view of inequality and intergenerational mobility, the effects of an increase in the quality of information on human capital (merit) and of an increase in the quality of the information on background (advantages) are essentially identical. Their effects differ in what respects to educational investment: it is larger and more direct the effect of meritocracy. Under this light, and given that the US shows very large shares in educational investment, it is reasonable to assume that the fact that the position of the US in the Great Gatsby curve (high inequality, low mobility) is due to be very meritocratic when compared to other countries in their Great Gatsby Vicinity.
AB - We present a theoretical model that analyses jointly the roles of meritocracy, advantages and investment in the determination of the distribution of human capital and income, and in the intergenerational persistence of these processes. In the model parents invest in their children’s education, increasing their human capital. Firms observe this human capital with noise. In order to improve in their predictions of the quality of workers, they use any available information on their background, as they know that richer parents educate their children more. Thus, in equilibrium the income of an agent depends on both the objective information that society has on its human capital (that we deem “merit”) and the perceptions that society has on its background (that we deem as “advantages”). We show that the more meritocratic a society is (the better the quality of the information that firm have on individual’s human capital), the more parents invest in their children education. Nevertheless the increase in average income thus generated comes at the expense of a larger degree of income inequality and of a lower degree of intergenerational mobility. Moreover, it is even possible that the weight of inherited advantages increases, as the role of parental investment is known to be more important. Thus, from the point of view of inequality and intergenerational mobility, the effects of an increase in the quality of information on human capital (merit) and of an increase in the quality of the information on background (advantages) are essentially identical. Their effects differ in what respects to educational investment: it is larger and more direct the effect of meritocracy. Under this light, and given that the US shows very large shares in educational investment, it is reasonable to assume that the fact that the position of the US in the Great Gatsby curve (high inequality, low mobility) is due to be very meritocratic when compared to other countries in their Great Gatsby Vicinity.
M3 - Working paper
BT - The Rise of Meritocracy and the Inheritance of Advantage
ER -