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The Changing Distribution of Earnings in OECD Countries$
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A.B. Atkinson

Print publication date: 2008

Print ISBN-13: 9780199532438

Published to Oxford Scholarship Online: September 2008

DOI: 10.1093/acprof:oso/9780199532438.001.0001

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A Behavioural Model of Change in Differentials: The ‘Fanning Out’ at the Top of the Earnings Distribution

A Behavioural Model of Change in Differentials: The ‘Fanning Out’ at the Top of the Earnings Distribution

Chapter:
(p.72) 8 A Behavioural Model of Change in Differentials: The ‘Fanning Out’ at the Top of the Earnings Distribution
Source:
The Changing Distribution of Earnings in OECD Countries
Author(s):

A. B. Atkinson (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199532438.003.0009

This chapter considers a behavioural model of changes in differentials, directed particularly at explaining the fanning out of the upper part of the earnings distribution. It suggests that changes may be observed in the extent to which earnings are governed by pay norms — changes corresponding to a switch from a redistributive norm to one where people are paid on their individual productivity, or vice versa. An external shock causes an abrupt reversal of direction and convergence to a new equilibrium. This could be caused by a change in the political climate, shifting the degree of conformity with the social norm, which is then magnified as more people change their behaviour. It could be caused by a change in the capital market, as where firms become more short term in their outlook, and less willing to invest in establishing a reputation.

Keywords:   earnings distribution, earnings dispersion, redistributive norm, productivity

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