Occupational choice, incentives and wealth distribution

Archishman Chakraborty, Alessandro Citanna

Research output: Contribution to journalArticlepeer-review

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 2005

Keywords

  • Matching
  • Moral hazard
  • Wealth distribution

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Occupational choice, incentives and wealth distribution'. Together they form a unique fingerprint.

Cite this