Author(s)
Luis Garicano and Esteban Rossi-Hansberg
Source
NBER Working Paper No. W11458, July 2005
Summary
This paper looks at the theory of equality in a knowledge economy.
Policy Relevance
As the costs of communications and information storage and retrieval change, organizations change. Inequality between types of workers can increase or decrease.
Main Points
- In an economy where knowledge is needed to work, each person chooses how much knowledge to acquire and produce.
- In organizations, people with poor skills rely on others, learning less than they would on their own. People with good skills join teams, learning more.
- Organizations will increase inequality of incomes.
- If communications are cheaper, organizations become more centralized.
- Teams use high-skill workers more.
- Low-skill workers refer to others more, increasing inequality.
- If data storage and searching are cheaper, decentralization increases, and self-employment increases.
- This theory explains some changes in the wage structure of the United States over the past 30 years.