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Random Job Prospects and the Distribution of Income


  • Anthony J. Venables


The paper examines job contracts consisting of a promotion procedure and a wage structure, which cause individuals of different ability to self-select into different jobs. It is established that although the promotion procedure is imperfect (as firms cannot directly obtain perfect information about workers) contracts exist that induce workers to reveal their ability through job choice. Such contracts support an informationally consistent equilibrium. In the equilibrium a proportion of individuals of each ability level are promoted. The paper examines the transformation this induces from the distribution of ability in the population to a distribution of earnings.

Suggested Citation

  • Anthony J. Venables, 1983. "Random Job Prospects and the Distribution of Income," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 637-657.
  • Handle: RePEc:oup:qjecon:v:98:y:1983:i:4:p:637-657.

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    Cited by:

    1. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, vol. 24(Q I), pages 19-38.

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