Three Essays on Economic Inequality

Title: Three Essays on Economic Inequality Author: Gustavo Nicolas Paez Salamanca This PhD dissertation studies how market structures and economic incentives transform heterogeneity at agent levels into unequal economic outcomes. The first chapter studies the economic incentives that lead a country to specialise its production in specific segments of a supply chain, and how these incentives transform heterogeneity at the productivity level into wage differences between countries. This chapter presents an innovative framework that incorporates production networks to the Ricardian trade model. It describes the price formation mechanism that occurs along supply chains and how it induces countries to focus on the production of specific goods. Moreover, the model highlights the role of the network structure in the determination of prices, and uses it to explain how changes in the productivity of a country have consequences in the production decisions and wages of the other countries that produce goods in the supply chain. The second chapter studies the effects that the heterogeneity of income flows has over the implementation of collective agreements. Collective agreements are the primary mechanism by which communities cope with market failures. However, the lack of enforcement mechanisms generates coordination challenges. This chapter presents a theoretical framework that studies how inequality among individuals affects the participation incentives of the individuals and explains why agreements that balance the rent-seeking behaviour of wealthy individuals with the redistribution interests of the poor reduce the adverse effects of heterogeneity, and can even use it to create more robust agreements. The third chapter studies heterogeneity at the level of academic journals. This chapter models the interaction between authors and journals as a platform market and uses this model to explain how general interest journals compete against field-specific journals. The model provides new insights into the way in which general interest journals link the different publication incentives of journals across fields. The theoretical results explain why general interest journals tend to attract higher quality publications and how changes in the publication capacity of a journal, or the volume of research in a field, can affect the quality of ideas published in both field-specific and general interest journals. Finally, this chapter applies the previous theoretical results to understand how the Top 5 journals in economics obtained their central role, and how their influence has changed between 1980 and the present. I dedicate this work to God. God allowed me to take the PhD challenge and gave me the tools I needed for it. God provided me with the ability to speak math and to translate it to and from reality. God enhanced my life with my parents, my brother, and all my family who are always there for me, and who always advise me and give me unconditional support for any decision I take. God encouraged my spirit by filling it with friends, tireless companions, who gave me their energy and effort every time I was running out of my own, and who reminded me of the colour of my name when the path was blurry. God illuminated my path, by letting me know excellent scholars, who taught me that, in an academic debate, the winners are those who are able to learn from the position of the other and use it to improve their own thoughts; no great researcher can be a one trick dog, and by learning from others, our own ideas flourish. Thanks to God I could conclude this work, and I’m eager to see what is the next challenge.