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Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution

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Author Info
Richard Walker
Abstract

A general equilibrium model of individual specialization is presented in which agents tradeoff the productivity and price implications of producing a narrower range of goods. Agentswith highly specific skills turn out to benefit most from large markets. The model is able toreplicate features of the long-term evolution of the US income distribution, withspecialization-biased technical change and the increase in employed population playing keyroles. Among the results is that, at least along one dimension of ability, the skill premium isincreasing in the relative supply of skills.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0707.

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Date of creation: Nov 2005
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Handle: RePEc:cep:cepdps:dp0707

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Related research
Keywords: specialization aggregate demand inequality market size

Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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    Other versions:
  3. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
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    Other versions:
  6. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December. [Downloadable!] (restricted)
  7. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March. [Downloadable!] (restricted)
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  10. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June. [Downloadable!] (restricted)
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    Other versions:
  12. Gary S. Murphy Becker & Kevin M., 1992. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - George G. Stigler Center for Study of Economy and State 79, Chicago - Center for Study of Economy and State.
    Other versions:
  13. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June. [Downloadable!] (restricted)
  14. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier. [Downloadable!] (restricted)
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    Other versions:
  18. Matthew F. Mitchell, 2001. "Specialization and the skill premium in the 20th century," Staff Report 290, Federal Reserve Bank of Minneapolis. [Downloadable!]
  19. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June. [Downloadable!] (restricted)
  20. Thomas J. Holmes & Matthew F. Mitchell, 2003. "A Theory of Factor Allocation and Plant Size," NBER Working Papers 10079, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  21. Macunovich, Diane J, 1998. "Relative Cohort Size and Inequality in the United States," American Economic Review, American Economic Association, vol. 88(2), pages 259-64, May. [Downloadable!] (restricted)
  22. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August. [Downloadable!] (restricted)
  23. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542. [Downloadable!]
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  25. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November. [Downloadable!] (restricted)
    Other versions:
  26. Baumgardner, James R, 1988. "Physicians' Services and the Division of Labor across Local Markets," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 948-82, October. [Downloadable!] (restricted)
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