Income inequality in a job-search model with heterogeneous discount factors: (revised version, forthcoming 2006, Revista Economia)

Rubens Cysne

No 611, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: This paper investigates the income inequality generated by a jobsearch process when di§erent cohorts of homogeneous workers are allowed to have di§erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne (2004, 2006)), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o§ers and the distribution of time preferences among cohorts provides some insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not Önd a job o§er each period.

Date: 2006-01-01
New Economics Papers: this item is included in nep-dge
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