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

Posted: 27 Jan 2004

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Abstract

I study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities. When an individual's contribution to firm output can be measured accurately in some activities but not in others, the most able workers select occupations in which their pay most closely reflects their own performance. In a world economy with two otherwise similar countries that have different distributions of talent, the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals. In this country, trade exacerbates the "polarization" of the labor force and often worsens the distribution of income.

Suggested Citation

Grossman, Gene M., The Distribution of Talent and the Pattern and Consequences of International Trade. Available at SSRN: https://ssrn.com/abstract=489684

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