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Income inequality: the role of impatience in a job-search process

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  • Cysne, Rubens Penha

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 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 Önd a job o§er each period.

Suggested Citation

  • Cysne, Rubens Penha, 2004. "Income inequality: the role of impatience in a job-search process," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 559, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:559
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    References listed on IDEAS

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    1. 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.
    2. 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).
    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..
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    4. Horowitz, Andrew W. & Flôres Junior, Renato Galvão, 2004. "Beyond indifferent players: on the existence of prisoners dilemmas in games with amicable and adversarial preferences," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 576, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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