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Wage Equality in a General Equilibrium Model with Indivisibilities

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  • Kala Krishna
  • Cemile Yavas

Abstract

This paper looks at some consequences of a comittment to wage equality in some sectors of the economy which produce lumpy consumer goods. We show that in this setting, there are two equilibria, with high or low wages, incomes and output. In this closed economy, growth may be immiserizing. We also show that redistribution may eliminate the low wage equilibrium in productive economies but in unproductive ones it eliminates the market for indivisible good itself! This suggests why redistribution could be a "rich man's game".

Suggested Citation

  • Kala Krishna & Cemile Yavas, "undated". "Wage Equality in a General Equilibrium Model with Indivisibilities," EPRU Working Paper Series 01-12, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:01-12
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    File URL: http://web.econ.ku.dk/epru/files/wp/WEB-blaa-2001-12.pdf
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    Cited by:

    1. Kala Krishna & Cemile Yavas, 2004. "Lumpy consumer durables, market power, and endogenous business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 375-391, May.
    2. Kala Krishna & Cemile Yavas, 2002. "When Does Trade Hurt? Market, Transition and Developing Economies," NBER Working Papers 8995, National Bureau of Economic Research, Inc.

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