Abstract
This paper investigates how and why the organization of production (relative sizes of occupational groups, distribution of firm sizes), can be correlated with measures of income inequality (GINI, income in the top 1%) in market economies, where individuals with different skills make occupational choices as employees, solo self-employed, or entrepreneur-managers. We identify the parameters of the production technology, the organizational costs, and the distribution of skills in the population that jointly determine the size of occupational groups and the level of inequality in the distribution of income in the market equilibrium. The comparative static analysis reveals the contribution to income inequality of “market” and “organization”.
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