Imperfect Labour Contracts and International Trade

Gene Grossman

No 2240, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In an economy with imperfect labour contracts, differences in the distribution of human capital are an independent source of comparative advantage. I study a world economy with two sectors, one where output is produced by teams and another where individuals can work alone. When workers' abilities are private information and workers cannot verify the value of output or the level of a firm's profits, feasible labour contracts fail to generate efficient matching of workers within teams. The mismatch of talent on teams is more severe in the country with the more heterogeneous labour force, which generates a comparative disadvantage for this country in team production. Trade exacerbates the 'polarization' of the more diverse society. National income could be raised, and the distribution of income improved, by a marginal expansion in the size of the team sector.

Keywords: Comparative Advantage; Diversity; Income Distribution; Labour Contracts; Team Production (search for similar items in EconPapers)
JEL-codes: D51 F11 (search for similar items in EconPapers)
Date: 1999-09
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2240 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Imperfect Labor Contracts and International Trade (1999)
Working Paper: Imperfect Labour Contracts and International Trade (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2240

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2240

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().