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Occupational Choice, Incentives and Wealth Distribution

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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.
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Dates and versions

hal-00599913 , version 1 (11-06-2011)

Identifiers

  • HAL Id : hal-00599913 , version 1

Cite

Alessandro Citanna, Archishman Chakraborty. Occupational Choice, Incentives and Wealth Distribution. 1999. ⟨hal-00599913⟩

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