Income inequality: the role of impatience in a job-search process
This paper investigates the income inequality generated by a jobsearch 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 Önd a job o§er each period.
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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..
- 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).