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Matching and Sorting in a Global Economy

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  • Gene M. Grossman
  • Elhanan Helpman
  • Philipp Kircher

Abstract

We develop a neoclassical trade model with heterogeneous factors of production. We consider a world with two factors, labor and "managers", each with a distribution of ability levels. Production combines a manager of some type with a group of workers. The output of a unit depends on the types of the two factors, with complementarity between them, while exhibiting diminishing returns to the number of workers. We examine the sorting of factors to sectors and the matching of factors within sectors, and we use the model to study the determinants of the trade pattern and the effects of trade on the wage and salary distributions. Finally, we extend the model to include search frictions and consider the distribution of employment rates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19513.

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Date of creation: Oct 2013
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Handle: RePEc:nbr:nberwo:19513

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References

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  1. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and decentralized price competition," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 29705, London School of Economics and Political Science, LSE Library.
  2. Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," NBER Working Papers 15097, National Bureau of Economic Research, Inc.
  3. Manolis Galenianos & Philipp Kircher, 2009. "Directed search with multiple job applications," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 29702, London School of Economics and Political Science, LSE Library.
  4. Mussa, Michael, 1982. "Imperfect factor mobility and the distribution of income," Journal of International Economics, Elsevier, Elsevier, vol. 12(1-2), pages 125-141, February.
  5. Manolis Galenianos & Philipp Kircher, 2012. "On the game-theoretic foundations of competitive search equilibrium," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 29707, London School of Economics and Political Science, LSE Library.
  6. Michael Peters, 1998. "Limits of Exact Equilibria for Capacity Constrained Sellers with costlySearch," Working Papers peters-98-01, University of Toronto, Department of Economics.
  7. Rossi-Hansberg, Esteban & Garicano, Luis & Antras, Pol, 2006. "Offshoring in a Knowledge Economy," Scholarly Articles 3196323, Harvard University Department of Economics.
  8. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 996-1025, October.
  9. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, Econometric Society, vol. 43(3), pages 455-68, May.
  10. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.
  11. Franziska Ohnsorge & Daniel Trefler, 2007. "Sorting It Out: International Trade with Heterogeneous Workers," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115(5), pages 868-892, October.
  12. Grossman, Gene M., 1983. "Partially mobile capital : A general approach to two-sector trade theory," Journal of International Economics, Elsevier, Elsevier, vol. 15(1-2), pages 1-17, August.
  13. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2012. "Trade and Inequality: From Theory to Estimation," NBER Working Papers 17991, National Bureau of Economic Research, Inc.
  14. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," Econometrica, Econometric Society, Econometric Society, vol. 77(4), pages 1165-1192, 07.
  15. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  16. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 874-904, October.
  17. 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.
  18. Thomas Sampson, 2012. "Selection into Trade and Wage Inequality," CEP Discussion Papers dp1152, Centre for Economic Performance, LSE.
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Cited by:
  1. Gabriel Felbermayr & Giammario Impullitti & Julien Prat, 2014. "Firm Dynamics and Residual Inequality in Open Economies," Discussion Papers 2014-01, University of Nottingham, GEP.
  2. Gene M. Grossman, 2013. "Heterogeneous Workers and International Trade," NBER Working Papers 18788, National Bureau of Economic Research, Inc.
  3. Poschke, Markus, 2014. "The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology," IZA Discussion Papers 7991, Institute for the Study of Labor (IZA).

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