I consider a dynamic model with endogenous human capital formation, competitively determined wages and two distinguishable, but ex ante identical groups of long-lived workers. It is shown that a group with a history of low human capital investment or whose workers expect low investment by future generations will converge to an inferior steady state. Similarly, a group with historically high human capital or high expectations for future generations will converge to a superior steady state. When a group reaches a steady state, they become stuck. Consequently, the inequality that results from two groups converging to different steady states is persistent.
- Statistical discrimination,
- General equilibrium,
- Asymmetric information,
- Human capital
Available at: http://works.bepress.com/rebecca_glawtschew/1/