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Income Inequality In A Job-Search Model With Heterogeneous Time Preferences?

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  • Rubens P. Cysne

Abstract

This paper investigates the income inequality generated by a job-search 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 time preference (Cysne, 2004), 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 quantitative 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 find a job offer each period.

Suggested Citation

  • Rubens P. Cysne, 2004. "Income Inequality In A Job-Search Model With Heterogeneous Time Preferences?," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 051, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    • Handle: RePEc:anp:en2004:051
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    References listed on IDEAS

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    1. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    2. By Ales BulÌr, 2001. "Income Inequality: Does Inflation Matter?," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-5.
    3. Pissarides, Christopher A, 1974. "Risk, Job Search, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1255-1267, Nov.-Dec..
    4. Cysne, Rubens Penha, 2004. "A search-theoretic explanation for the negative correlation between labor income and impatience," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 558, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    5. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 113-126.
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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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