Working Paper: NBER ID: w11094
Authors: Pol Antràs; Luis Garicano; Esteban Rossi-Hansberg
Abstract: How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality in the South but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy.
Keywords: offshoring; globalization; wage inequality; international teams
JEL Codes: D2; F1; F2; J3; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Globalization (F60) | Better matches for Southern workers (J79) |
| Better matches for Southern workers (J79) | Increased productivity of Southern workers (J24) |
| Increased productivity of Southern workers (J24) | Increased marginal return to skill for Southern workers (J24) |
| Globalization (F60) | Increased within-worker wage inequality in the South (J31) |
| Increased within-worker wage inequality in the South (J31) | Improved managerial matches (C78) |
| Globalization (F60) | Increased competition for low-skilled Northern workers (F66) |
| Increased competition for low-skilled Northern workers (F66) | Decreased marginal return to skill for low-skilled Northern workers (F66) |
| Globalization (F60) | Increased relative value for high-skilled Northern workers (J39) |
| Globalization (F60) | Increased wage inequality in the North (J31) |