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Random job prospects and the distribution of income

Venables, Tony (1983) Random job prospects and the distribution of income. Quarterly Journal of Economics, 98 (4). pp. 637-657. ISSN 0033-5533

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The paper examines job contracts consisting of a promotion procedure and a wage structure, which cause individuals of different ability to self-select into different jobs. It is established that although the promotion procedure is imperfect (as firms cannot directly obtain perfect information about workers) contracts exist that induce workers to reveal their ability through job choice. Such contracts support an informationally consistent equilibrium. In the equilibrium a proportion of individuals of each ability level are promoted. The paper examines the transformation this induces from the distribution of ability in the population to a distribution of earnings.

Item Type: Article
Official URL:
Additional Information: © 1983 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 27 Apr 2007

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