Cheap home goods and persistent inequality (Q607483)

This paper follows the classic work of \textit{D. Acemoglu} and \textit{J. A. Robinson} [Q. J. Econ. 115, No.~4, 1167--1199 (2000; Zbl 0973.91077)], in studying the equilibrium growth path of an economy where parents invest in children's education. The main result is to show the existence of, and characterize, the 3 possible equilibrium growth paths of the economy: only skilled parents educate their children; both skilled and unskilled educate their children; all skilled and some unskilled parents educate their children. There is no equilibrium where only unskilled parents educate their children. The implications of equilibrium for persistent inequality are explored.