The dynamics of wealth distribution with asymmetric incentives and endogenous matching


Economic Theory

novembre 2007, vol. 33, n°2, pp.243-261

Départements : Economie et Sciences de la décision

Mots clés : Incentive, Matching market, Poverty traps

In a dynastic economy with warm-glow bequest individuals can form firms in a frictionless matching market. Contracts within firms are subject to moral hazard. Production tasks differ in incentive intensity and the matching market is open until production takes place. The credit market is perfect. In a principal'agent context, we examine the long-run effects on the wealth distribution, and show the presence of hysteresis and poverty traps*BUSINESS enterprises*CONTRACTS*ECONOMICS*HYSTERESIS (Economics)*RISK management*MORAL hazard*WEALTHEconomic aspectsPOVERTY