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On the Economic Content of the Gini Coefficient

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  • Semih Tümen

    (Central Bank of the Republic of Turkey)

Abstract

This paper argues that the canonical assignment model, which is widely used in the study of wage determination, provides natural links to the standardized tools of inequality analysis, such as the Lorenz curve and the Gini coefficient. I show that an intuitive formula for the Gini coefficient of earnings can be derived using a standard assignment model. Such a model is useful in understanding the potential sources of earnings inequality, since it formulates the Gini coefficient as a function of the dispersion of worker skills, the distribution of firm productivities, and the strength of complementarities in production between capital and labor. The Gini coefficient increases with the dispersion of skills, the dispersion of productivities, and the labor share.

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File URL: http://ekonomitek.org/pdffile/8_dergi_makale4_semih_tumen.pdf
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Bibliographic Info

Article provided by Turkish Economic Association in its journal Ekonomi-tek.

Volume (Year): 1 (2012)
Issue (Month): 1 (January)
Pages: 97-110

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Handle: RePEc:tek:journl:v:1:y:2012:i:1:p:97-110

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Keywords: Gini coefficient; earnings inequality; earnings equation; the assignment model;

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  6. Semih Tumen, 2011. "Measuring Earnings Inequality: An Economic Analysis Of The Bonferroni Index," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(4), pages 727-744, December.
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  16. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  17. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2010. "Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 91-128, February.
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