Abstract
I introduce a simple model which endogenously generates a Pareto distribution in top earnings. Workers inhabit different niches, and the earnings of a worker is determined by the niche-specific supply of labor and a downward-sloping labor demand curve. The highest paid workers are the ones that inhabit a niche with few other workers. A Pareto tail in earnings emerges as long as the labor demand curve has a limit elasticity and the distribution of workers over niches satisfies a regularity condition from extreme-value theory, satisfied by virtually all continuous distributions in economics.
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