In this paper, the theory of behavior under income uncertainty with many commodities is extended to allow for nonlinear budget constraints, where random variations in income induce simultaneous randomness in shadow prices. It is shown that (1) any change in the marginal (indirect) utility of...

In the context of non-diversifiable and sector-specific risks in labour markets, we show that the resulting factor market distortion - attributable to an endogenous intersectoral wage differential - can provide a possible rationale that explains why larger wage dispersion prevails in developing...