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

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  • Richard Walker
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    Abstract

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

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    Bibliographic Info

    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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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    Keywords: specialization; aggregate demand; inequality; market size;

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    Cited by:
    1. Jeffrey Thompson & Timothy M. Smeeding, 2010. "Recent Trends in the Distribution of Income: Labor, Wealth and More Complete Measures of Well Being," Working Papers wp225, Political Economy Research Institute, University of Massachusetts at Amherst.

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