Occupational Choice, Wealth Distribution and Development
This paper develops a model of occupational choice and income distribution in which both the wage rate and the interest rate are determined endogenously. We show the existence of multiple equilibria that depend on the initial distribution. In particular there can be a "development trap" characterized by many poor workers earning low wages and few rich entrepreneurs that exploit the low wage level and the high interest rate.
|Date of creation:||Sep 1999|
|Date of revision:||Sep 1999|
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- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- Abhijit V. Banerjee & Andrew F. Newman, 1990.
"Occupational Choice and the Process of Development,"
911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988.
"Industrialization and the Big Push,"
NBER Working Papers
2708, National Bureau of Economic Research, Inc.
- Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-406, November.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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