ORGANIZATION AND INEQUALITY IN A KNOWLEDGE ECONOMY

We present an equilibrium theory of the organization of work in an economywhere knowledge is an essential input in production and agents are heterogeneousin skill. Agents organize production by matching with others in knowledgehierarchies designed to use and communicate their knowledge efficiently. Relativeto autarky, organization leads to larger cross-sectional differences in knowledgeand wages: low skill workers learn and earn relatively less. We show that improvementsin the technology to acquire knowledge lead to opposite implicationson wage inequality and organization than reductions in communication costs.[...]