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Author: Lizama, Carlos
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1. Lizama, Carlos
Essays in Macroeconomics
Ph.D. Dissertation, Department of Economics, New York University, 2020
Cohort(s): Children of the NLSY79, NLSY79, NLSY97
Publisher: ProQuest Dissertations & Theses (PQDT)
Keyword(s): Armed Forces Qualifications Test (AFQT); Cognitive Ability; College Enrollment; Human Capital; Intergenerational Patterns/Transmission; Panel Study of Income Dynamics (PSID); Peabody Individual Achievement Test (PIAT- Math); Transfers, Parental; Wealth

Permission to reprint the abstract has not been received from the publisher.

The first chapter, "Sources of Lifetime Inequality Revisited", develops a theory to assess the importance of differences in early stages in life, before entering the labor market, in lifetime earnings, wealth and welfare. Factors established early in life can be key determinants of the lifetime value of earnings, consumption, and wealth. Furthermore, some of these variables are determined by parental background (ability, human capital) or passed on directly from parents (wealth). In this paper, I study a life cycle - overlapping generations economy with borrowing constraints and costly human capital acquisition, in which initial conditions are determined by parental background. The cost of human capital may prevent constrained agents to optimally acquire human capital and intergenerational transmission of wealth may alleviate this effect for wealthy households. Using data from the Panel Study of Income Dynamics (PSID) and the National Longitudinal Survey of Youth (NLSY), I document statistics of the evolution of cohort inequality and the importance of parental transfer to attend college. I find that initial conditions can explain about 10% of the variation in lifetime income and wealth. Relaxing borrowing increases college enrollment and decreases inequality. The intergenerational correlation of abilities explains more than half of the intergenerational income elasticity, suggesting an important role for the parental background.
Bibliography Citation
Lizama, Carlos. Essays in Macroeconomics. Ph.D. Dissertation, Department of Economics, New York University, 2020.