Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution

Richard Walker

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: A general equilibrium model of individual specialization is presented in which agents trade off the productivity and price implications of producing a narrower range of goods. Agents with highly specific skills turn out to benefit most from large markets. The model is able to replicate features of the long-term evolution of the US income distribution, with specialization-biased technical change and the increase in employed population playing key roles. Among the results is that, at least along one dimension of ability, the skill premium is increasing in the relative supply of skills.

Keywords: specialization; aggregate demand; inequality; market size (search for similar items in EconPapers)
JEL-codes: E23 E25 O11 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-ltv and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0707

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