It is widely documented that places with higher levels of income inequality have lower rates of social mobility. But it is an open question as to whether or how higher levels of inequality actually lead to lower rates of mobility, We propose that one channel by which higher rates of income inequality might lead to lower rates of upward mobility is through lower rates of human capital investment among low-income individuals. Specifically, we posit that greater levels of income inequality could lead low-income youth to perceive a lower return to investment in their own human capital.
Income Inequality, Social Mobility, and the Decision to Drop-Out of High SchoolKearney, Melissa and Phillip Levine ,
Brookings Papers on Economic Activity