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Income Inequality in a Job-Search Model With Heterogeneous Discount Factors

Author

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  • Rubens Penha Cysne

    (FGV)

Abstract

This paper investigates the income inequality generated by a job-search process when different cohorts of homogeneous workers are allowed to have different degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne 2004, 2006), I show that the Lorenz curve and the between-cohort Gini coefficient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage offers and the distribution of time preferences among cohorts provides some insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not find a job offer each period.

Suggested Citation

  • Rubens Penha Cysne, 2006. "Income Inequality in a Job-Search Model With Heterogeneous Discount Factors," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 7(2), pages 217-224.
  • Handle: RePEc:anp:econom:v:7:y:2006:i:2:p:217-224
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    File URL: http://www.anpec.org.br/revista/vol7/vol7n2p217_224.pdf
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    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Pissarides, Christopher A, 1974. "Risk, Job Search, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1255-1267, Nov.-Dec..
    3. Cysne, Rubens Penha, 2006. "On The Positive Correlation Between Income and Patience," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(1), January.
    4. Cysne, Rubens Penha, 2004. "A search-theoretic explanation for the negative correlation between labor income and impatience," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 558, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    5. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
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    Citations

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    Cited by:

    1. Rivano, Ricardo de Oliveira & Wallace, Neil, 2006. "New models of old(?) payment questions," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 619, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    2. Araújo, Fabio & Issler, João Victor & Fernandes, Marcelo, 2006. "A stochastic discount factor approach to asset pricing using panel data," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 628, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    3. Flôres Junior, Renato Galvão, 2006. "Dois ensaios sobre diversidade cultural e o comércio de serviços," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 622, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    4. Zhijie Xiao & Luiz Renato Lima, 2007. "Testing Covariance Stationarity," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 643-667.
    5. Lima, Luiz Renato & Néri, Breno Pinheiro, 2007. "Comparing Value-at-Risk Methodologies," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 27(1), May.
    6. Flôres Junior, Renato Galvão, 2006. "The diversity of diversity: further methodological considerations on the use of the concept in cultural economics," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 626, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    7. Lima, Luiz Renato & Gaglianone, Wagner Piazza & Sampaio, Raquel M.B., 2008. "Debt ceiling and fiscal sustainability in Brazil: A quantile autoregression approach," Journal of Development Economics, Elsevier, vol. 86(2), pages 313-335, June.

    More about this item

    Keywords

    Income Inequality; Job Search; Impatience; Time Preference;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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