Income Inequality in a Job-Search Model With Heterogeneous Discount Factors
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.
Volume (Year): 7 (2006)
Issue (Month): 2 ()
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References listed on IDEAS
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- J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
- 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..
- Dale T. Mortensen & Christopher A. Pissarides, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies,
Oxford University Press, vol. 61(3), pages 397-415.
- 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.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Cysne, Rubens Penha, 2004. "A search-theoretic explanation for the negative correlation between labor income and impatience," Economics Working Papers (Ensaios Economicos da EPGE) 558, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Cysne, Rubens Penha, 2006. "On The Positive Correlation Between Income and Patience," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(1), January.
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