Perceptions, biases, and inequality

Dasgupta, Dyotona and Saha, Anuradha (2022) Perceptions, biases, and inequality. Journal of Economic Behavior and Organization, 202. pp. 198-210. ISSN 01672681

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This paper introduces perceived self-efficacy beliefs in an overlapping generations model and studies the effects of behavioral anomalies on human capital investments and aggregate inequality. These beliefs are not inherent but based on a person’s socio-economic background. Ex ante children are homogeneous, but parents are biased about the returns to their children’s education. Based on parental education and job status, parents may be over or under confident but otherwise, they are rational. We witness spillover effects that shift the incentives to educate children from the pessimistic parents to unbiased parents. Biases may induce or hinder investment. Over-investment by one parent type may even crowd-out investments of other parent types. We find interesting effects of biases on the aggregate economy when parental warm glow is not low

Item Type: Article
Keywords: Behavioral inequality | Human capital investment | Behavioral bias | Intergenerational mobility
Subjects: Social Sciences and humanities > Business, Management and Accounting > Human Resource Management
JGU School/Centre: Jindal Global Business School
Depositing User: Amees Mohammad
Date Deposited: 06 Sep 2022 09:33
Last Modified: 06 Sep 2022 09:33
Official URL:


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