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Occupational choice and development

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  • Eeckhout, Jan
  • Jovanovic, Boyan

Abstract

The rise in world trade since 1970 has been accompanied by a rise in the geographic span of control of management and, hence, also a rise in the effective international mobility of labor services. We study the effect of such a globalization of the worldʼs labor markets. The worldʼs welfare gains depend positively on the skill-heterogeneity of the worldʼs labor force. We find that when people can choose between wage work and managerial work, the worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 2 ()
Pages: 657-683

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:657-683

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Occupational choice; Mobility; Matching; Openness;

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References

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  1. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and ... Convergence, Period," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 351-397, May.
  2. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2005. "Offshoring in a Knowledge Economy," NBER Working Papers 11094, National Bureau of Economic Research, Inc.
  3. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  4. Nguyen, Sang V & Lee, Seong-Hoon, 2002. " Returns to Scale in Small and Large U.S. Manufacturing Establishments: Further Evidence," Small Business Economics, Springer, vol. 19(1), pages 41-50, August.
  5. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  6. Ángel Gavilán, 2006. "Wage inequality, segregation by skill and the price of capital in an assignment model," Banco de Espa�a Working Papers 0613, Banco de Espa�a.
  7. Ariel Burstein & Alexander Monge-Naranjo, 2007. "Foreign Know-How, Firm Control, and the Income of Developing Countries," NBER Working Papers 13073, National Bureau of Economic Research, Inc.
  8. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  9. Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," 2006 Meeting Papers 518, Society for Economic Dynamics.
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Cited by:
  1. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, vol. 147(2), pages 545-550.

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