Market Size, Occupational Self‐Selection, Sorting, and Income Inequality

25 Pages Posted: 11 Jan 2018

See all articles by Kristian Behrens

Kristian Behrens

University of Quebec at Montreal (UQAM) - Department of Economics

Dmitry Pokrovsky

National Research University Higher School of Economics

Evgeny Zhelobodko

In memoriam

Date Written: January 2018

Abstract

We develop a monopolistic competition model with heterogeneous agents who self‐select into occupations (entrepreneurs and workers) depending on innate ability. The effect of market size on the equilibrium occupational structure crucially hinges on properties of the lower tier utility function—its scale elasticity and relative love‐for‐variety. When combined with the underlying ability distribution, the share of entrepreneurs and income inequality can increase or decrease with market size. When extended to allow for the endogenous sorting of mobile agents between cities, numerical examples suggest that sorting may increase inequality within and between cities.

Keywords: income inequality, market size, occupational self‐selection, sorting

Suggested Citation

Behrens, Kristian and Pokrovsky, Dmitry and Zhelobodko, Evgeny, Market Size, Occupational Self‐Selection, Sorting, and Income Inequality (January 2018). Journal of Regional Science, Vol. 58, Issue 1, pp. 38-62, 2018, Available at SSRN: https://ssrn.com/abstract=3099838 or http://dx.doi.org/10.1111/jors.12342

Kristian Behrens (Contact Author)

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Dmitry Pokrovsky

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Evgeny Zhelobodko

In memoriam

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
153
PlumX Metrics