Aversion to Inequality and Segregating Equilibria
AbstractThis working paper shows that models where preferences of individuals depend not only on their allocations, but also on the well-being of other persons, can produce both large and testable effects. We study the allocation to firms of workers with heterogeneous productivities to firms. We show that even small deviations from purely selfish preferences lead to widespread workplace skill segregation. This result holds for a broad class and distribution of social preferences. That is, workers of different abilities tend to work in different firms, as long as they care somewhat more about the utilities of workers who are close.
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Bibliographic InfoPaper provided by Fundacion BBVA / BBVA Foundation in its series Working Papers with number 201083.
Date of creation: Jul 2007
Date of revision:
Contract theory; mechanism design; envy; social preferences; skill segregation.;
Other versions of this item:
- A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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- Antonio Cabrales & Antoni Calvó-Armengol & Nicola Pavoni, 2004.
"Social Preferences, Skill Segregation and Wage Dynamics,"
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- Antonio Cabrales & Antoni Calvo-Armengol & Nicola Pavoni, 2005. "Social Preferences, Skill Segregation, and Wage Dynamics," 2005 Meeting Papers 205, Society for Economic Dynamics.
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- Fershtman, C. & Weiss, Y. & Hvide, H.K., 2001. "Status Concerns and the Organization of Work," Papers 2001-2, Tel Aviv.
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