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

Listed author(s):
  • Manoj Atolia
  • Yoshinori Kurokawa

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.

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File URL: http://www.econ.tsukuba.ac.jp/RePEc/2014-001.pdf
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Paper provided by Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba in its series Tsukuba Economics Working Papers with number 2014-001.

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Date of creation: Feb 2014
Date of revision: Apr 2015
Handle: RePEc:tsu:tewpjp:2014-001
Contact details of provider: Postal:
1-1-1 Tennodai, Tsukuba, Ibaraki 305-8571

Web page: http://www.econ.tsukuba.ac.jp/

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  1. Kurokawa, Yoshinori, 2010. "Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality," Economics Letters, Elsevier, vol. 108(2), pages 141-144, August.
  2. Blanchard, Emily & Willmann, Gerald, 2013. "Trade, education, and the shrinking middle class," Kiel Working Papers 1831, Kiel Institute for the World Economy (IfW).
  3. William Milberg, Deborah Winkler, 2009. "WP 2009-5 Financialization and the Dynamics of Offshoring in the U.S," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2009-5, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  4. Maarten Goos & Alan Manning, 2007. "Lousy and Lovely Jobs: The Rising Polarization of Work in Britain," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 118-133, February.
  5. Roine, Jesper & Waldenstrom, Daniel, 2008. "The evolution of top incomes in an egalitarian society: Sweden, 1903-2004," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 366-387, February.
  6. Robert J. Gordon & Ian Dew-Becker, 2008. "Controversies about the Rise of American Inequality: A Survey," NBER Working Papers 13982, National Bureau of Economic Research, Inc.
  7. Thomas I. Palley, 2007. "Financialization: What It Is and Why It Matters," Working Papers wp153, Political Economy Research Institute, University of Massachusetts at Amherst.
  8. Hein, Eckhard, 2011. "Distribution, 'financialisation' and the financial and economic crisis: Implications for post-crisis economic policies," IPE Working Papers 09/2011, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  9. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
  10. Matthew F. Mitchell, 2005. "Specialization And The Skill Premium In The 20th Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 935-955, 08.
  11. Frederiksen, Anders & Kato, Takao, 2011. "Human Capital and Career Success: Evidence from Linked Employer-Employee Data," IZA Discussion Papers 5764, Institute for the Study of Labor (IZA).
  12. 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.
  13. Edward P. Lazear, 2010. "Leadership: A Personnel Economics Approach," NBER Working Papers 15918, National Bureau of Economic Research, Inc.
  14. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 67-150.
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