Alvaro Montenegro

Labor Mobility, Job Preferences, and Income Distribution

A model is presented to illustrate the role of labor mobility in income distribution. Worker preference for different occupations and wage comparisons are combined to determine the allocation of labor between sectors and to trace the behavior of the Gini coefficient as mobility increases. The Gini coefficient fails to fall monotonically with increasing labor mobility, making its interpretation ambiguous. It is also shown that the Gini coefficient has a lower nonzero limit, a fact compatible with empirical findings.

Information as an explanatory variable

This article explores the use of information-theoretic explanatory variables in stock price forecasting regressions. Stock price changes, as the dependent variable, is run against traditional explanatory variables such as lags of price changes and lags of the squares of the price changes. The addition of lags of a variable related to the information content of the price changes is shown to significantly improve the explanatory power. This exercise should encourage the use of information related variables in forecasting financial markets.