Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 263: Risk, Occupational Choice, and Inequality

Klas Sandén ()
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Klas Sandén: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: This essay presents a new theory explaining increased wage inequality. A standard endogenous growth model is augmented with occupational choice of highskill workers. Depending on the occupational choice, high-skill workers earn either a certain or uncertain income. Wage inequality, measured by the average wage of high-skill workers divided by the average wage of low-skill workers, can increase or decrease due to an increased supply of high-skill workers.

Keywords: Distribution; Wages; Cooperatives; Technological Change; Economic Growth

JEL-codes: D33; J31; J54; O32; O41

44 pages, September 10, 2007

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