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Income Inequality In A Job-Search Model With Heterogeneous Time Preferences?

  • Rubens P. Cysne

This paper investigates the income inequality generated by a job-search process when di¤erent cohorts of homogeneous workers are allowed to have di¤erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the time preference (Cysne, 2004), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o¤ers and the distribution of time preferences among cohorts provides some quantitative 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.

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Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] with number 051.

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Date of creation: 2004
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Handle: RePEc:anp:en2004:051
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  1. Pissarides, Christopher A, 1974. "Risk, Job Search, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1255-67, Nov.-Dec..
  2. 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).
  3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  4. Ales Bulir, 1998. "Income Inequality; Does Inflation Matter?," IMF Working Papers 98/7, International Monetary Fund.
  5. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
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