Occupational Choice and the Process of Development
Abhijit Banerjee and
Journal of Political Economy, 1993, vol. 101, issue 2, 274-98
This paper models economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth. Becau se of capital-market imperfections, poor agents choose working for a wa ge over self-employment and wealthy agents become entrepreneurs who monitor workers. Only with sufficient inequality, however, will ther e be employment contracts; otherwise, there is either subsistence or self-employment. Thus, in static equilibrium, the occupational structure depends on distribution. Since the latter is itself endogenous, the authors demonstrate the robustness of this result b y extending the model dynamically and studying examples in which initi al wealth distributions have long-run effects. Copyright 1993 by University of Chicago Press.
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Working Paper: Occupational Choice and the Process of Development (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:101:y:1993:i:2:p:274-98
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