Wealth inequalities persist due to imperfect capital markets, impacting intergenerational mobility.
The article explores how initial wealth differences can persist over time in an economy. When people can't easily commit to certain efforts, those with more wealth have an advantage in getting credit and taking on bigger projects. This leads to varying interest rates and levels of intergenerational mobility, affecting wealth gaps within and between countries. The findings suggest that initial wealth inequalities can have long-lasting effects on economic outcomes, influencing the need for policies that address these disparities.