How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality in the South but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11094.
Length: Date of creation: Jan 2005 Date of revision: Handle: RePEc:nbr:nberwo:11094
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Find related papers by JEL classification: D2 - Microeconomics - - Production and Organizations F1 - International Economics - - Trade F2 - International Economics - - International Factor Movements and International Business J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Dalia Marin & Verdier Thierry, 2007.
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