Income Inequality in a Job-Search Model with Heterogeneous Discount Factors
Revista Economia No. 611
13 Pages Posted: 31 Jan 2014
Date Written: January 22, 2006
Abstract
This paper investigates the income inequality generated by a jobsearch process when different cohorts of homogeneous workers are allowed to have different degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne (2004, 2006)), I show that the Lorenz curve and the between-cohort Gini coefficient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage offers and the distribution of time preferences among cohorts provides some 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.
Keywords: income inequality, unemployment, Job
JEL Classification: D63, J64
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