U.K. employment and self-employment income inequality are analyzed over 1979-94/95. Robust inequality decompositions reveal occupation to be a relatively important and hitherto neglected determinant of earnings inequality. In contrast, self-employment income inequality is harder to explain,...

Existing functional forms commonly used to represent the earnings distribution have weak micro-foundations and relatively poor empirical goodness-of-fit. This paper presents an optimizing model of firm behaviour, which predicts the earnings distribution to follow the beta distribution of the...

This paper applies the techniques of stochastic optimal control to the problem of price-taking agents choosing the optimal balance between self-employment and paid employment. The two principal innovations are the development of an intertemporal optimizing model for heterogeneous agents under...