Outsourcing In A Knowledge Economy
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Overview: How does the formation of cross-country teams affect the organization of work and the structure of wages? The Paper by Harvard University answers this question through a model of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. The properties of the competitive equilibrium of the model in a closed economy are first studied, and shown that the model has a unique and efficient solution. This Paper then studies the equilibrium of a two-country model.