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Entry Costs, Task Variety, and Skill Flexibility: A Simple Theory of (Top) Income Skewness

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  • Manoj Atolia
  • Yoshinori Kurokawa

Abstract

This paper develops a simple model that provides a unified explanation of the increased skewness of wage income distribution based on differences in flexibility of skills--modeled as differences in the setup costs required to combine/perform a given number of tasks. Our numerical experiments in a calibrated model show that, by increasing task variety, a decrease in the fixed costs of entry due to entry deregulation can be a quantitatively important source of both the increase in below-top skewness and the larger increase in within-top skewness. Moreover, the experiments imply that the observed differences in entry deregulation can cause significant differences in the top skewness across countries that have similar technological change. This can provide an answer to Piketty and Saez's (2006) question.

Suggested Citation

  • Manoj Atolia & Yoshinori Kurokawa, 2014. "Entry Costs, Task Variety, and Skill Flexibility: A Simple Theory of (Top) Income Skewness," Tsukuba Economics Working Papers 2014-001, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba, revised Apr 2015.
  • Handle: RePEc:tsu:tewpjp:2014-001
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    References listed on IDEAS

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    11. Ian Dew-Becker, 2008. "How Much Sunlight Does it Take to Disinfect a Boardroom? A Short History of Executive Compensation Regulation," CESifo Working Paper Series 2379, CESifo Group Munich.
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