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

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Author Info
Gene Grossman ()

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Abstract

In an economy with imperfect labor contracts, differences in the distribution of talent can be an independent source of comparative advantage. I study a world economy with two activities, one in which an individual's contribution to production can be measured accurately and another in which workers engage in joint production. When individuals have private information about their own talents, the most able workers self-select into the occupation in which their reward best reflects their own performance. I describe an equilibrium in which the country with a more heterogeneous labor force exports the good that is produced by the most talented individuals. In this country, trade exacerbates the "polarization" of labor and often worsens the distribution of income.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 745.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_745

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Related research
Keywords: labor contracts; diversity; joint production; comparative advantage; income distribution;

Find related papers by JEL classification:
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
F11 - International Economics - - Trade - - - Neoclassical Models of Trade

References listed on IDEAS
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  1. Matsuyama, Kiminori, 1992. "A Simple Model of Sectoral Adjustment," Review of Economic Studies, Blackwell Publishing, vol. 59(2), pages 375-88, April. [Downloadable!] (restricted)
  2. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August. [Downloadable!] (restricted)
  3. Gene M. Grossman & Giovanni Maggi, 1998. "Diversity and Trade," NBER Working Papers 6741, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Legros, Patrick & Newman, Andrew, 2000. "Monotone Matching In Perfect And Imperfect Worlds," CEPR Discussion Papers 2396, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    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. Malcomson, James M, 1981. "Unemployment and the Efficiency Wage Hypothesis," Economic Journal, Royal Economic Society, vol. 91(364), pages 848-66, December. [Downloadable!] (restricted)
  8. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  9. Clemenz, Gerhard, 1995. " Adverse Selection in Labor Markets and International Trade," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(1), pages 73-88, March.
  10. Grossmann, G.M. & Maggi, G., 1998. "Diversity and Trade," Papers 192, Princeton, Woodrow Wilson School - Public and International Affairs.
  11. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June. [Downloadable!] (restricted)
  12. Ruffin, Roy J, 1988. "The Missing Link: The Ricardian Approach to the Factor Endowments Theory of Trade," American Economic Review, American Economic Association, vol. 78(4), pages 759-72, September. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Gene M. Grossman, 1998. "Imperfect Labor Contracts and International Trade," Working Papers 155, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.. [Downloadable!]
  15. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May. [Downloadable!] (restricted)
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This page was last updated on 2009-12-14.

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