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

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  • Gene Grossman

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.

Suggested Citation

  • Gene Grossman, 2002. "The Distribution of Talent and the Pattern and Consequences of International Trade," CESifo Working Paper Series 745, CESifo.
    • Handle: RePEc:ces:ceswps:_745
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    References listed on IDEAS

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    Cited by:

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    2. Fujita, M. & Weber, S., 2010. "Immigration Quotas in the Globalized Economy," Journal of the New Economic Association, New Economic Association, issue 7, pages 10-23.
    3. Masahisa Fujita & Shlomo Weber, 2003. "Strategic Immigration Policies and Welfare in Heterogeneous Countries," KIER Working Papers 569, Kyoto University, Institute of Economic Research.

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