Skill Acquisition, Incentive Contracts and Jobs: Labor Market Adjustment to Trade

Nicholas Sly

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines how global integration influences worker behavior regarding skill acquisition, as well as firm behavior regarding incentive contracts and occupational diversity. The approach integrates several key components of international trade and the wage distribution in developed countries: namely heterogeneous firms, trade in similar goods, and performance payments to workers that endogenously obtain different skill levels. Greater trading opportunities reduce aggregate prices, causing workers to experience a greater marginal utility derived from income, as well as the skills that aid them in fulfilling performance contracts. Firms respond to skill accumulation among the labor force by adjusting the provision of incentive contracts, and the types of jobs they offer. Labor market adjustment to trade liberalization is characterized by a more steep, but less extensive, provision of incentive contracts among the labor force; higher overall wage inequality exhibiting a U-shaped differential; and job polarization across skill-groups.

Keywords: Job Polarization; Performance Pay; Trade Adjustment (search for similar items in EconPapers)
JEL-codes: F16 J24 J8 (search for similar items in EconPapers)
Date: 2010-08-17
New Economics Papers: this item is included in nep-bec, nep-int and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25004

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