Neoclassical production, scarcity of skills and Pareto distributions

被引:0
|
作者
Lopez-Velasco, Armando R. [1 ]
机构
[1] Univ Texas Rio Grande Valley, Dept Econ, Edinburg, TX 78539 USA
关键词
Power law; Pareto; CES; Earnings distribution; Income distribution; Wage distribution; IMMIGRATION; ECONOMICS; MODEL;
D O I
10.1016/j.econlet.2023.111495
中图分类号
F [经济];
学科分类号
02 ;
摘要
The distribution of top earnings follows a "power-law": the top tail of the distribution is thick relative to other distributions and is approximately Pareto-distributed. There are different mechanisms proposed in the literature that yield Pareto distributions and power-laws. This paper shows that a simple general equilibrium model where aggregate production is assumed of the constant-elasticity-of-substitution (CES) type over multiple labor inputs generates distributions in earnings and wages that follow power-laws. The finding is very general as the distribution of the skill-types is irrelevant for the shape parameter (the Pareto exponent) of the power law. The model displays a tight relationship between the Pareto exponent and the elasticity of substitution between the labor inputs. Available empirical estimates of the elasticities of labor substitution and of the labor supply predict a Pareto exponent consistent with its empirical counterpart for the distribution of earnings in the US.
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页数:5
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