FI network leader Pierre-André Chiappori sat down with HCEO during our recent Workshop on Human Capital Formation and Family Economics to discuss his work on human capital investment and assortative matching.

"One of the main sources of inequality is the differences in what we call human capital," he says. "So the difference in wealth is something, but the difference in this potential to generate wealth because of your education, because of your knowledge, because of your ability, is probably more important."

Chiappori noted what he calls the "human capital spiral," wherein people start life at a disadvantage due to the effects of assortative matching.

"We had this sort of spiral whereby educated people tend to marry together, they tend to invest a lot in the education of their children," he says. "This investment of course generates a huge level inequality in the initial development of children, which means that in the next generation the process will be amplified."

According to Chiappori, generating human capital is a complex process, and the process is largely cumulative. Thus the earlier in life people can be targeted for investment, the more efficient that investment will be.
"It's extremely efficient to invest during the first year of life," he says.
Chiappori is the E. Rowan and Barbara Steinschneider Professor of Economics at Columbia University. You can view his lecture from HCEO's Workshop on Human Capital Formation here.