Occupational choice, incentives and wealth distribution

Archishman Chakraborty, Alessandro Citanna

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)206-224
Number of pages19
JournalJournal of Economic Theory
Volume122
Issue number2
DOIs
StatePublished - Jun 1 2005

Fingerprint

Wealth
Wealth distribution
Incentives
Occupational choice
Endowments
Moral hazard
Large economy
Limited liability

Keywords

  • Matching
  • Moral hazard
  • Wealth distribution

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Occupational choice, incentives and wealth distribution. / Chakraborty, Archishman; Citanna, Alessandro.

In: Journal of Economic Theory, Vol. 122, No. 2, 01.06.2005, p. 206-224.

Research output: Contribution to journalArticle

Chakraborty, Archishman ; Citanna, Alessandro. / Occupational choice, incentives and wealth distribution. In: Journal of Economic Theory. 2005 ; Vol. 122, No. 2. pp. 206-224.
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