This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Add to Saved Citations Download to citation manager Request Permissions Request Reprints Add to My Marked Citations Citing Articles Citing Articles via Google Scholar Citing Articles via Scopus Google Scholar Articles by Jasso, G. Search for Related Content Social Bookmarking                         What's this?

A New Model of Wage Determination and Wage Inequality

Department of Sociology, New York University, 295 Lafayette Street, 4th Floor, New York, NY 10012-9605, gj1{at}nyu.edu

This paper proposes a new model of wage determination and wage inequality. In this model, wage-setters set workers' wages; they do so either directly, as when individuals vote in a salary committee, or indirectly, as when political parties, via the myriad of social, economic, fiscal, and other policies, generate wages. The recommendations made by wage-setters (or arising from their policies) form a distribution, and all the wage-setter-specific distributions are combined into a single final wage distribution. There may be any number of wage-setters; some wage-setters count more than others; and the wage-setters may differ among themselves on both the wage distribution and the amounts recommended for particular workers. We use probability theory to derive initial results, including both distribution-independent and distribution-specific results. Fortuitously, elements of the model correspond to basic democratic principles. Thus, the model yields implications for the effects of democracy on wage inequality. These include: (1) the effects of the number of wage-setters and their power depend on the configuration of agreements and disagreements; (2) independence of mind reduces wage inequality, and dissent does so even more; (3) when leaders of democratic nations seek to forge an economic consensus, they are unwittingly inducing greater economic inequality; (4) arguments for independent thinking will be more vigorous in small societies than in large societies; (5) given a fixed distributional form for wages and two political parties which either ignore or oppose each other's distributional ideas, the closer the party split to 50–50, the lower the wage inequality; and (6) under certain conditions the wage distribution within wage-setting context will be normal, but the normality will be obscured, as cross-context mixtures will display a wide variety of shapes.

Key Words: consensus • dissent • form of government • Gini coefficient • independence of mind • power • probability distributions • shifted exponential distribution • shifted general Erlang distribution • shifted mirror-exponential distribution • wage-setter

Rationality and Society, Vol. 21, No. 1, 113-168 (2009)
DOI: 10.1177/1043463108099350


CiteULike    Complore    Connotea    Del.icio.us    Digg    Reddit    Technorati    Twitter    What's this?