Offshore Production, Student Effort, and Income Inequality

This paper presents a simple model to show that, in addition to technological development and global outsourcing, heterogeneous lifetime preferences for leisure are essential to income inequality. Allocating leisure time to studying is viewed as suffering in exchange for future comfort, and income inequality in a country arises when some prefer the leisure trade-off but others prefer smooth leisure over the lifetime. I also argue that, in a country where residents feel less suffering in the leisure trade-off, greater income inequality is incurred. This model implies that low latitude countries generally suffer from greater income inequality than high latitude countries.