NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Perceptions of Equity and the Distribution of Income

Julio J. Rotemberg

NBER Working Paper No. 5624
Issued in June 1996
NBER Program(s):   EFG

This paper builds a simple model where there is a link between employees' perception of the fairness of employers and the actual distribution of income. Wages are based in part on employers' assessments of the productivity of individual employees. I show that the equilibrium distribution of income depends on the beliefs of employees concerning the accuracy of these evaluations. I give conditions under which the distribution of income across employees of the same vintage is more equal if employees believe that these evaluations are generally inaccurate (so that they are skeptical of capitalists in general) than when they believe that these evaluations are accurate. The model is consistent with the fact that, in a sample of seven countries, the distribution of income is more unequal in countries where people feel that income inequality is not too large.

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Document Object Identifier (DOI): 10.3386/w5624

Published: Rotemberg, Julio J. "Perceptions Of Equity And The Distribution Of Income," Journal of Labor Economics, 2002, v20(2,Apr), Part 1, 249-288. citation courtesy of

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