Type-Specific Wages as a Distributional Buffer in TANK

How does type-specific wage adjustment change the cross-type incidence of aggregate shocks?

The model maintains that financial type coincides with an imperfectly substitutable labor segment, so relative wages redirect employment and earnings between hand-to-mouth households and savers.

I derive a consumption-gap decomposition and show that, for zero inherited wage dispersion and a geometric conditional wedge path, earnings reallocation partially offsets direct profit-transfer incidence.

In an illustrative monetary benchmark, the peak consumption gap is 42.3 percent smaller with type-specific wages than under a reduced-form common-wage closure, while the peak output gap differs by 2.3 percent.

Thus, the common-wage closure closely approximates benchmark aggregate transmission but not distributional incidence.

The consumption-gap ordering holds in all 36 cells of a joint parameter grid, with differences of 10.9--47.8 percent.

Because the comparison changes the wage-setting institution, it is a quantitative incidence contrast rather than a single-parameter causal effect or a welfare ranking.