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Occupational Choice and the Process of Development

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  • Banerjee, Abhijit V
  • Newman, Andrew F

Abstract

This paper models economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth. Becau se of capital-market imperfections, poor agents choose working for a wa ge over self-employment and wealthy agents become entrepreneurs who monitor workers. Only with sufficient inequality, however, will ther e be employment contracts; otherwise, there is either subsistence or self-employment. Thus, in static equilibrium, the occupational structure depends on distribution. Since the latter is itself endogenous, the authors demonstrate the robustness of this result b y extending the model dynamically and studying examples in which initi al wealth distributions have long-run effects. Copyright 1993 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 101 (1993)
Issue (Month): 2 (April)
Pages: 274-98

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Handle: RePEc:ucp:jpolec:v:101:y:1993:i:2:p:274-98

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References

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  1. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August.
  2. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  3. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  4. Millward, R., 1981. "The emergence of wage labor in early modern England," Explorations in Economic History, Elsevier, vol. 18(1), pages 21-39, January.
  5. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  6. Glenn M. MacDonald, 1982. "Specific Investments and Nonlabor Income," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 225-233, Spring.
  7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  8. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
  9. Timothy J Kehoe & David K Levine, 1993. "Debt Constrained Asset Markets," Levine's Working Paper Archive 1276, David K. Levine.
  10. Stiglitz, J.E., 1988. "Economic Organization, Information And Development," Papers 21, Princeton, Woodrow Wilson School - Discussion Paper.
  11. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  12. Cohen, Jon S, 1981. "Managers and Machinery: An Analysis of the Rise of Factory Production," Australian Economic Papers, Wiley Blackwell, vol. 20(36), pages 24-41, June.
  13. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  14. M. Ali Khan, 1989. "In Praise of Development Economics," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 28(4), pages 337-384.
  15. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
  16. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  17. Eswaran, Mukesh & Kotwal, Ashok, 1989. "Why Are Capitalists the Bosses?," Economic Journal, Royal Economic Society, vol. 99(394), pages 162-76, March.
  18. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
  19. Townsend, Robert M, 1987. "Models as Economies," Economic Journal, Royal Economic Society, vol. 98(390), pages 1-24, Supplemen.
  20. Andrew F. Newman, 1991. "The Capital Market," Discussion Papers 951, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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