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Journal Articles Journal of Economic Theory Year : 2005

Occupational choice, incentives and wealth distribution

Abstract

We consider a model of occupational choice in large economies where individuals differ in their wealth endowment. Individuals can remain self-employed or engage in productive matches with another individual, i.e., form firms. Matches are subject to a moral hazard problem with limited liability. The division of the gains from such matches is determined by competitive forces. When the incentive problem is asymmetric, matches are typically wealth-heterogeneous, with richer individuals choosing the occupation for which incentives are more important. The utilities attained within a match depend on the wealth distribution and changes in the latter give rise to ‘trickle down' effects.

Dates and versions

hal-00463229 , version 1 (11-03-2010)

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Alessandro Citanna, Archishman Chakraborty. Occupational choice, incentives and wealth distribution. Journal of Economic Theory, 2005, Vol.122,n°2, pp.206-224. ⟨10.1016/j.jet.2003.11.004⟩. ⟨hal-00463229⟩

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