Sorting it Out: International Trade with Heterogeneous Workers
Posted: 21 Dec 2007
Each worker brings a bundle of skills to the workplace, for example, quantitative and communication skills. Since employers must take this bundle as a package deal, they choose workers with just the right mix of skills. We show that international differences in the distribution of worker skill bundles - for example, Japan's abundance of workers with a modest mix of both quantitative and teamwork skills - have important implications for international trade, industrial structure, and domestic income distribution. Formally, we model two-dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical, as in the Roy model.
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