TALENT, GROWTH AND INCOME-DISTRIBUTION

A model with heterogeneous individuals and bequests between generations is constructed to analyze income distribution and educational choice. The introduction of an imperfection in the credit market is shown to influence the allocation of talent. Both ability and bequest are of relevance in deciding whether or not to invest in education. With learning by doing between generations, the allocation of talent affects not only the level of production, but also the growth rate.