Firm Productivity, Occupational Choice, and Inequality in a Global Economy (revised March 2015)
This study proposes a simple theory of trade with endogenous firm productivity, occupational choice, and income inequality. Individuals with different managerial talent choose to become self-employed entrepreneurs or workers. Entrepreneurs enhance firm productivity by investing in managerial capital. The model generates three income classes: low-income workers facing the prospect of unemployment; middle-income entrepreneurs managing domestic firms; and high-income entrepreneurs managing global firms. A reduction in per-unit trade costs raises productivity of global firms, reduces productivity of domestic firms, and worsens personal income distribution by generating labor-market polarization. A reduction in fixed exporting costs reduces productivity of every firm and has an ambiguous effect on personal income distribution. Trade-liberalization policies raise unemployment and improve welfare.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Baton Rouge, LA 70803-6306|
Web page: http://www.business.lsu.edu/economics
More information through EDIRC
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.:
- Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007.
"Distributional Effects of Globalization in Developing Countries,"
Journal of Economic Literature,
American Economic Association, vol. 45(1), pages 39-82, March.
- Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Itskhoki, Oleg & Redding, Stephen, 2010.
"Inequality and Unemployment in a Global Economy,"
25586656, Harvard University Department of Economics.
- Helpman, Elhanan & Itskhoki, Oleg & Redding, Stephen J., 2009. "Inequality and Unemployment in a Global Economy," CEPR Discussion Papers 7353, C.E.P.R. Discussion Papers.
- Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
- Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
- Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2009. "Inequality and Unemployment in a Global Economy," CEP Discussion Papers dp0940, Centre for Economic Performance, LSE.
- Chiara Criscuolo & Jonathan E. Haskel & Matthew J. Slaughter, 2005.
"Global Engagement and the Innovation Activities of Firms,"
NBER Working Papers
11479, National Bureau of Economic Research, Inc.
- Criscuolo, Chiara & Haskel, Jonathan E. & Slaughter, Matthew J., 2010. "Global engagement and the innovation activities of firms," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 191-202, March.
- Monte, Ferdinando, 2009.
"Skill Bias, Trade, and Wage Dispersion,"
14719, University Library of Munich, Germany.
- Hartmut Egger & Udo Kreickemeier, .
"Fairness, Trade, and Inequality,"
08/19, University of Nottingham, GEP.
- Zvi Griliches, 1998.
"Issues in Assessing the Contribution of Research and Development to Productivity Growth,"
in: R&D and Productivity: The Econometric Evidence, pages 17-45
National Bureau of Economic Research, Inc.
- Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
- Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-93, December.
- Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
- Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
- Melitz, Marc J. & Trefler, Daniel, 2012.
"Gains from Trade When Firms Matter,"
10914282, Harvard University Department of Economics.
- Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
- 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.
- Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1051-1099.
- Thomas Lemieux, 2007.
"The Changing Nature of Wage Inequality,"
NBER Working Papers
13523, National Bureau of Economic Research, Inc.
- Xavier Gabaix & Augustin Landier, 2006.
"Why Has CEO Pay Increased So Much?,"
NBER Working Papers
12365, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:lsu:lsuwpp:2014-04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.