WEALTH DISTRIBUTION, INVESTMENT
INHUMANCAPITALAND
OCCUPATIONALCHOICEWHEN
CAPITALMARKETSARE IMPERFECT
R iccardaL ongarettiα
November9, 2001
A bstract
I n oτdfer to study the long- run e≈ ects ofagents' heterogeneity we
consider overlapping generations of individuas who diπer from one
another in wealth and ire^ ciency eve⅛l. W hen young) agents choose
whether to invest or not in human capital. Since the net return of
human capital investment is positive agents who can aa ord such an
investment, doinvest. In thesecond period oflife, agentsmakean oc-
cupationalchoice. Theychoosetobeworkers orentrepreneurs. T here
exists acritical le^elofineC Oiencybelowwhichbeɪmingentreɔreneur
is pro..tab>le T heweath distribution and theoccupational structure
ofagents changes overtime, the formerbeing the cause and the ef-
fectofthe latter. The long run wealth distribution is stationary and
can be eitherergodic ornot, with long-run occupationalmobility or
not. W eshowhowtheeconomy's structuralparameters and thetypes
ofintergenerational transmission ofski ls a^eotthedynamiepatterns
and the long-run equilibria.
εD ipartimentodi Econcmia P oiitica⅛ U niversità degjii Studi di M i lano- B icocca P .zza
dell'A teneoN uovo, 1 20126MILANO e-mail: riccarda.longaretti@ unimib.it