This paper emphasizes the effects of an individual's effort in study and his parental human capital in his human capital formation. It demonstrates the possibility of persistent income inequality even if education is completely free (e.g. completely pub1ic). It indicates that the initial parental human capital distribution determines subsequent human capital formation and occupational choice, and hence an economy's long-run income distribution. This study also shows that, as a result of labor market discrimination, minorities are pushed to the two extremes of an economy's income distribution, depending on the level of their initial parental human capital.
Fan, C. S. (1995). Initial human capital distribution and long run income (CPPS Working Paper Series No.24). Retrieved from Lingnan University website: http://commons.ln.edu.hk/cppswp/18/