Optimism and firm formation

This paper analyses firm formation and innovation in an economy where agents differ with respect to their optimism in the face of ambiguity. Individuals choose between starting a firm or working in one; and also between employing a traditional technology or a new technology about which little is known. In the face of ambiguity, decision-makers are either optimistic or pessimistic. We study the innovation-proof equilibria of the economy: wages clear all labor markets when agents make optimal occupational choices, and no mutually beneficial opportunity for innovation remains unexploited. In equilibrium, optimists are more likely to form firms, but also more likely to be workers in firms using the ambiguous technology. This phenomenon sheds new light on the relationship between firm culture and technology. We find that three types of firms emerge in equilibrium: entrepreneurial firms, where both owners and workers are optimists operating a highly ambiguous technology; traditional firms, where an optimistic owner employs a pessimistic worker and uses a less ambiguous technology; and bureaucratic firms where both owners and workers are pessimists employing a well-known technology. We also suggest how the relative scarcity of the optimists may help to explain the commonly observed S-shaped diffusion profile for successful innovations.     

Income distribution, efficiency and rationing

This paper studies the impacts of income distribution on the efficiency of trade mechanism and rationing of agents who are priced out of trade in a dynamic search model with two-sided asymmetric information. Buyers and sellers have asymmetric information about valuations and incomes respectively. In such a frictional environment, the effects of several variants of changes in income distribution on efficiency of trading mechanism and the population of rationed buyers and sellers are elaborated.     

Income distribution functions with disturbances

Recent exercises in the maximum likelihood estimation of income distribution functions provide goodness of fit tests which lead to the rejection of most models. This result is usually ignored on the ground that the test is too strict, since it allows for sampling variation only. If income distribution functions, like other econometric models, are not meant to hold exactly, we should introduce disturbances in the statistical model. Here we treat observed income as the sum of a systematic component with a specific two-parameter distribution — Pareto, Gamma, or Lognormal — and an independent normal error. The ensuing models fit conventional U.S. income data much better than their traditional counterparts, but they still fail a goodness of fit test.     

Innovation,competition and firm size distribution on fragmented markets

This paper presents a simple model of firm and consumer behavior. We formulate a sub-market entry game, where boundedly rational firms decide on investing in R&D for inventing new products that will appeal to targeted groups of consumers. The success depends on the amount of resources available for the project as well as on the firm’s familiarity with market characteristics. Successful innovation feeds back into the firm size and (potentially into) market knowledge and increases the future R&D productivity. A new product decreases the market-shares of incumbents. However, this business stealing effect is asymmetric across incumbent population. We identify the section of parameter space where firms have an incentive to diversify horizontally. In this section, the model results in rich industrial dynamics. Firm size heterogeneity emerges endogenously in the model. Equilibrium firm size distributions are heavy tailed and skewed to the right. The heaviness of the tail depends on submarket specificity of firm’s market knowledge. This relationship is non-monotonic, emphasizing two different effects of innovation on industrial dynamics (positive feedback and asymmetric business stealing).     

Income distribution in a chinese commune

This paper analyzes income distribution data for a single brigade of a commune in Fukien Province, after the 1962 movement down to the production team as the basic agricultural unit. The primary result is that returns to nonlabor resources owned by the production teams cause significant income differences between team income levels even within the same production brigade. Inequality based in ownership patterns seems incompatible with Chinese Communist ideological principles so its continued existence reflects the extent to which pragmatism has dominated ideology in the People's Republic of China.     

Income splitting, specialization, and intra-family distribution

Abstract Income splitting for tax purposes results in more specialization of wives, but does this in turn generate more gender inequality? In my dynamic bargaining model with a divorce threatpoint, I find that who controls the couple's labour supply plays a crucial role in establishing this link. If spouses choose their labour supply non‐cooperatively, only the husband's increase – but not her own decrease – in labour supply introduces a negative term in the wife's change in welfare. If the wife does not control her own labour supply, a decrease in her own labour supply introduces an additional negative term.     

Income distribution in East European and Western countries

This study compares income distribution in East and West, taking into account the effects of different tax systems and the special benefits of the elite group in Eastern Europe.     

Income distribution and growth in a monopolist economy

Journal of Economics -     

Income distribution, borrowing constraints and redistributive policies

This paper sheds light on the relationship between income inequality and redistributive policies and provides possible guidance in the specification of empirical tests of such a relationship. We model a two-period economy where capital markets are imperfect and agents vote over the level of taxation to finance redistributive policies that enhance future productivity. In this context, we show that the pivotal voter is not necessarily the agent (class) with median income. In particular, the poor, who are more likely to be liquidity constrained, may form a coalition with the rich and vote for low redistribution. The effects of an increase in income inequality on the level of redistribution turn out to depend on whether the increase in inequality is concentrated among the poor or the middle class. Empirical results from a panel of 22 OECD countries provide preliminary evidence consistent with our main theoretical implications.     

收入分配、金融发展与宏观风险：一个文献综述

从收入分配角度解释金融危机是当前国际上正在热烈讨论的重要议题。本文旨在对这一研究领域的发展历程和最新进展做一个简单的综述。文章沿着收入分配研究的两条发展脉络——基于要素的收入分配理论和基于人际的收入分配理论——展开,并且分别考察了金融发展在两条路径的逻辑链条中起到的作用。最后,在回顾文献的基础上．提示出我国经济中潜在的宏观风险,得到对中国有借鉴意义的结论和启示。     

A model of income distribution in a revenue-sharing firm

Income distribution within a fixed-membership firm is modeled assuming that all net revenue is distributed to workers. The payment system used is a generalization, for heterogeneous workers, of an income equation first adopted by Sen. We introduce the assumption that payment rates for different workers are chosen to maximize an individualistic welfare function for the firm. A general result for a maximin welfare function is obtained and, using a simulation, we explore the effects of different elasticities of substitution in individual utility functions and different weights put on egalitarianism in the welfare function.     

The effects of mergers and acquisitions on the firm size distribution

This paper provides new empirical evidence on the effects of mergers and acquisitions (M&As) on the shape of the firm size distribution, by using data of the population of manufacturing firms in the Netherlands. Our analysis shows that M&As do not affect the size distribution when we consider the entire population of firms. When we focus on the firms involved in an M&A event, we observe a shift of the firm size distribution towards larger sizes. Firm size distribution becomes more concentrated around the mean, less skewed to the right hand side, and thinner at the tails as a whole. The shift toward higher sizes due to M&A is not uniform but affects firms of different sizes in different ways. While the number of firms in the lower tail decreased, the number of firms in the central size classes increased substantially and outweighed the increase in the number (and mean size) of firms in the upper tail of the distribution (consequently the overall market concentration measured by the Herfindahl index declines). M&As lead to a departure from log-normality of the firm size distribution, suggesting that external growth does not follow Gibrat’s law. Our counterfactual analysis highlights that only internal growth does not affect the shape of the size distribution of firms. On the contrary, it suggests that the change in the size distribution is almost entirely due to the external growth of the firms.

Income distribution evaluation and the law of one price

The growing literature on evaluating changes in the distribution of income has led recently to a consideration of the conditions under which such evaluation is possible without reference to existing prices. This paper provides a complete characterization of the class of preferences/social orderings for which this is possible in the case where the law of one price is not assumed— different individuals may face different price vectors. The relationship of this result to those which are known for the one-price case is also briefly considered.     

Income distribution and exchange in a dynamic search model

This paper studies the link between income distribution and trade mechanisms in a dynamic search model with two-sided asymmetric information. Buyers and sellers have imperfect information about the income levels of the other group. Furthermore, asymmetry of information about incomes is the source of price dispersion. In such a frictional environment, we capture the effects of a change in inter- and intra-class income distribution on the trade mechanism, which is represented by the expected trade volume and the flux of buyers and sellers in the market.     

Income distribution and redistribution through taxation: An international comparison

Income tax progressivity is studied with Generalized Entropy measures of inequality. Luxembourg Income Study data sets for nine countries are used for international comparison and analysis. progressivity indices are generated by using the Generalized Entropy family as well as Atkinson measures. We further our understanding by examining pre-tax and post-tax measures of inequality based respectively on gross and disposable household incomes. The decomposition property is shown to be desirable for enhancing our knowledge of income inequality and the redistributive effect of income taxes. Thus decomposition based on family size and number of earners is conducted. We learn that countries vary in their emphasis regarding redistributive effects of income taxes.