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Occupational choice, incentives and wealth redistributions with scarcity of capital

Author

Listed:
  • Archishman Chakraborty
  • Alessandro Citanna

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a matching model of firm formation with moral hazard, we characterize the equilibrium for economies with scarcity of capital and study the effects of redistributive taxation. We give necessary and sufficient conditions determining the equilibrium matching patterns, payoffs and interest rate. These depend only on aggregate wealth and the median wealth relative to the active population, compared to setup costs and technological parameters. We confirm previous results (see [2]), showing that monotonic job specialization typically obtains when incentives are asymmetric within firms. Redistributive taxation now propagates its effects through the asset market and there may wealth nonmonotonic interest groups over median changes.

Suggested Citation

  • Archishman Chakraborty & Alessandro Citanna, 2002. "Occupational choice, incentives and wealth redistributions with scarcity of capital," Working Papers hal-00593379, HAL.
    • Handle: RePEc:hal:wpaper:hal-00593379
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    Keywords

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    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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