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Entrepreneurial Abilities: Structure of Labor Market and Income Inequality

Author

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  • Dmitry Aleksandrovich Pokrovsky

    (National Research University Higher School of Economics)

Abstract

This paper is addressed to explanation of differentiation of economics in structure of labor market and income distribution. In order to this aim the author develops a model of endogenous formation of entrepreneurship in economics with heterogeneous agents. The nature of heterogeneity is non- trivial distribution of entrepreneurial abilities across individuals. The impact of form and support of distribution of abilities as well as structure of preferences are studied. The key result is impact of an elasticity of substitution and an elasticity of distribution function on share of entrepreneurs and income inequality in opposite way. This effect must be taken into account when arbitrary economic policy is developed. Also author consider two transformation of support of distribution of entrepreneurial abilities: 1) tension and compression, 2) shift. Economies which are equivalence in sense of first type of support transformation have the same share of entrepreneurs in population and the same level of income inequality. In the second case economy with less able individuals in average has bigger share of entrepreneurs in population and it is more differentiated in income.

Suggested Citation

  • Dmitry Aleksandrovich Pokrovsky, 2014. "Entrepreneurial Abilities: Structure of Labor Market and Income Inequality," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 2, pages 9-39.
    • Handle: RePEc:far:spaeco:y:2014:i:2:p:9-39
    DOI: DOI:10.14530/se.2014.2.009-039
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