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Income Inequality in a Job-Search Model With Heterogeneous Discount Factors

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Author Info

  • Rubens Penha Cysne

    (FGV)

Abstract

This paper investigates the income inequality generated by a job-search process when different cohorts of homogeneous workers are allowed to have different degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne 2004, 2006), I show that the Lorenz curve and the between-cohort Gini coefficient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage offers and the distribution of time preferences among cohorts provides some insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not find a job offer each period.

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File URL: http://www.anpec.org.br/revista/vol7/vol7n2p217_224.pdf
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Bibliographic Info

Article provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its journal Economia.

Volume (Year): 7 (2006)
Issue (Month): 2 ()
Pages: 217-224

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Handle: RePEc:anp:econom:v:7:y:2006:i:2:p:217-224

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Related research

Keywords: Income Inequality; Job Search; Impatience; Time Preference;

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References

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  1. Rubens Penha Cysne, 2006. "On The Positive Correlation Between Income and Patience," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(1), pages 21-32, January.
  2. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  3. Cysne, Rubens Penha, 2004. "A search-theoretic explanation for the negative correlation between labor income and impatience," Economics Working Papers (Ensaios Economicos da EPGE) 558, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  4. Pissarides, Christopher A, 1974. "Risk, Job Search, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1255-67, Nov.-Dec..
  5. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
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Citations

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Cited by:
  1. Flôres Junior, Renato Galvão, 2006. "The Diversity of Diversity: further methodological considerations on the use of the concept in cultural economics," Economics Working Papers (Ensaios Economicos da EPGE) 626, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Rivano, Ricardo de Oliveira & Wallace, Neil, 2006. "New models of old(?) payment questions," Economics Working Papers (Ensaios Economicos da EPGE) 619, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Lima, Luiz Renato Regis de Oliveira & Sampaio, Raquel Menezes Bezerra & Gaglianone, Wagner Piazza, 2006. "Debt ceiling and fiscal sustainability in Brazil: a quantile autoregression approach," Economics Working Papers (Ensaios Economicos da EPGE) 631, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  4. Araújo, Fabio & Issler, João Victor & Fernandes, Marcelo, 2006. "A Stochastic Discount Factor Approach to Asset Pricing Using Panel Data," Economics Working Papers (Ensaios Economicos da EPGE) 628, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  5. Luiz Renato Lima & Breno Pinheiro Néri, 2006. "Comparing Value-at-Risk Methodologies," Computing in Economics and Finance 2006 1, Society for Computational Economics.
  6. Flôres Junior, Renato Galvão, 2006. "Dois ensaios sobre diversidade cultural e o comércio de serviços," Economics Working Papers (Ensaios Economicos da EPGE) 622, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  7. Zhijie Xiao & Luiz Renato Lima, 2007. "Testing Covariance Stationarity," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 643-667.

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