On Globalization and the Concentration of Talent

CID Research Fellow and Graduate Student Working Paper No. 121

Ulrich Schetter and Oriol Tejada
December 2019

Abstract:

We analyze how globalization affects the allocation of talent across competing teams in large matching markets. Assuming a reduced form of globalization as a convex transformation of payoffs, we show that for every economy where positive assortative matching is an equilibrium without globalization, it is also an equilibrium with globalization. Moreover, for some economies positive assortative matching is an equilibrium with globalization but not without. The result that globalization promotes the concentration of talent holds under very minimal restrictions on how individual skills translate into team skills and on how team skills translate into competition outcomes. Our analysis covers many interesting special cases, including simple extensions of Rosen (1981) and Melitz (2003) with competing teams.

Keywords: competing teams, globalization, inequality, matching
JEL Classification: C78, D3, D4, F61, F66
Affiliated Research Program: Growth Lab