Introduction: Firms and the Distribution of Income: The Roles of Productivity and Luck

Introduction: Firms and the Distribution of Income: The Roles of Productivity and Luck

Journal of Labor Economics. January
2018, Vol. 36, Issue 1, Pages 1-12

It has been well documented that the dispersion of income within most countries has grown over time. Dispersion can be a reflection of some positive features of an economy, most notably, increased returns to investing in skills. It is generally good when our investments pay off well, and that pertains to investments in human as well as physical capital. A social problem arises, however, when not everyone has the opportunity to invest in those skills or when the distribution of those skills reflects the luck of the draw rather than the conscious actions taken by the individuals who are the beneficiaries of the pay rewards.