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Occupational Choice and Development

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  • Jan Eeckhout
  • Boyan Jovanovic

Abstract

The rise in world trade since 1970 has raised international mobility of labor services. We study the effect of such a globalization of the world's labor markets. We find that when people can choose between wage work and managerial work, the output gains are U-shaped: A worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13686.

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Date of creation: Dec 2007
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Publication status: published as Eeckhout, Jan & Jovanovic, Boyan, 2012. "Occupational choice and development," Journal of Economic Theory, Elsevier, vol. 147(2), pages 657-683.
Handle: RePEc:nbr:nberwo:13686

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  1. Ariel Burstein & Alexander Monge-Naranjo, 2007. "Foreign Know-How, Firm Control, and the Income of Developing Countries," NBER Working Papers 13073, National Bureau of Economic Research, Inc.
  2. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2005. "Offshoring in a Knowledge Economy," NBER Working Papers 11094, National Bureau of Economic Research, Inc.
  3. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  4. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports, Federal Reserve Bank of New York 96, Federal Reserve Bank of New York.
  5. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and ... Convergence, Period," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(2), pages 351-397, May.
  6. repec:hrv:faseco:4784031 is not listed on IDEAS
  7. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  8. Xavier Gabaix & Augustin Landier, 2008. "Why Has CEO Pay Increased So Much?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(1), pages 49-100, 02.
  9. Ángel Gavilán, 2006. "Wage inequality, segregation by skill and the price of capital in an assignment model," Banco de Espa�a Working Papers 0613, Banco de Espa�a.
  10. Nguyen, Sang V & Lee, Seong-Hoon, 2002. " Returns to Scale in Small and Large U.S. Manufacturing Establishments: Further Evidence," Small Business Economics, Springer, Springer, vol. 19(1), pages 41-50, August.
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Cited by:
  1. Emilio Congregado & Antonio Golpe & André Stel, 2014. "The role of scale economies in determining firm size in modern economies," The Annals of Regional Science, Springer, Springer, vol. 52(2), pages 431-455, March.
  2. Vicente Salas-Fumás & J. Sanchez-Asin & David Storey, 2014. "Occupational choice, number of entrepreneurs and output: theory and empirical evidence with Spanish data," SERIEs, Spanish Economic Association, Spanish Economic Association, vol. 5(1), pages 1-24, March.
  3. Pierre-Richard Agénor & Otaviano Canuto & Michael Jelenic, 2012. "Avoiding Middle-Income Growth Traps," World Bank Other Operational Studies 16954, The World Bank.
  4. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(2), pages 545-550.

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