The dynamics of wealth distribution with asymmetric incentives and endogenous matching

Research output: Contribution to journalArticle

Abstract

In a dynastic economy with warm-glow bequest individuals can form firms in a frictionless matching market. Contracts within firms are subject to moral hazard. Production tasks differ in incentive intensity and the matching market is open until production takes place. The credit market is perfect. In a principal-agent context, we examine the long-run effects on the wealth distribution, and show the presence of hysteresis and poverty traps.

Original languageEnglish (US)
Pages (from-to)243-261
Number of pages19
JournalEconomic Theory
Volume33
Issue number2
DOIs
StatePublished - Nov 1 2007

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Keywords

  • Incentive
  • Matching market
  • Poverty traps

ASJC Scopus subject areas

  • Economics and Econometrics

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