We consider a model with two types of consumers, with each preferring a different variety of goods, and with each better at producing the type of good it prefers to consume. We find that under plausible conditions members of the majority group earn a higher wage and enjoy higher utility than members of the minority group; and that any one member of the minority group may gain by working in a firm producing goods preferred by the majority, but that all minority members could be better off if none worked in that sector. The results are broadly consistent with the stylized facts about recent increases in income inequality.
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Paper provided by California Irvine - School of Social Sciences in its series Papers with number
98-99-13.