Occupational choice and development

Jan Eeckhout, Boyan Jovanovic

    Research output: Contribution to journalArticlepeer-review

    Abstract

    The rise in world trade since 1970 has been accompanied by a rise in the geographic span of control of management and, hence, also a rise in the effective international mobility of labor services. We study the effect of such a globalization of the world's labor markets. The world's welfare gains depend positively on the skill-heterogeneity of the world's labor force. We find that when people can choose between wage work and managerial work, the worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice.

    Original languageEnglish (US)
    Pages (from-to)657-683
    Number of pages27
    JournalJournal of Economic Theory
    Volume147
    Issue number2
    DOIs
    StatePublished - Mar 2012

    Keywords

    • Matching
    • Mobility
    • Occupational choice
    • Openness

    ASJC Scopus subject areas

    • Economics and Econometrics

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