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The Distribution of Talent and the Pattern and Consequences of International Trade

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Author Info
Gene M. Grossman
Abstract

I study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities. When an individual's contribution to firm output can be measured accurately in some activities but not in others, the most able workers select occupations in which their pay most closely reflects their own performance. In a world economy with two otherwise similar countries that have different distributions of talent, the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals. In this country, trade exacerbates the "polarization" of the labor force and often worsens the distribution of income.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 1 (February)
Pages: 209-239
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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:1:p:209-239

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