Organization and Inequality in a Knowledge Economy*

Abstract

We present an equilibrium theory of the organization of work in an economy where knowledge is an essential input in production and agents are heterogeneous in skill. Agents organize production by matching with others in knowledge hierarchies designed to use and communicate their knowledge efficiently. Relative to autarky, organization leads to larger cross-sectional differences in knowledge and wages: low skill workers learn and earn relatively less. We show that improvements in the technology to acquire knowledge lead to opposite implications on wage inequality and organization than reductions in communication costs.

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@inproceedings{Garicano2003OrganizationAI, title={Organization and Inequality in a Knowledge Economy*}, author={Luis Garicano and Esteban Rossi-Hansberg and Daron Acemoglu and Fernando Alvarez and Karin Bernhardt and Jacques Cr{\'e}mer and Wouter Dessein and Douglas W. Diamond and Liran Einav and Daniel Ferreira and Antonio Gavil{\'a}n and Robert H. Gertner and Robert Gibbons and Robert Hall and Thomas J. Holmes and Tom Hubbard and Narayana Kocherlakota and Felix Kubler and Kevin Murphy and Canice Prendergast and Luis Rayo and Richard Rogerson and Tano J. Santos and Ilya Segal and Robert Shimer and Steven Tadelis and Ivan Werning}, year={2003} }