differences in productivity across countries (Hanushek and Kimko, 2000). I build upon Kremer’s (1993) O-ring theory of production … one excellent worker. In equilibrium, an econometrician would only see small returns to skill within a country. In a world …. Implications for immigration policy, dual labor market theory, and border regions are discussed …

study how the earnings distribution changes with distortions that penalize high-productivity firms and frictions that reduce … much firms are willing to pay workers, how well high-skill workers are matched with high-productivity firms, and how much …

. In contrast, higher per capita income, greater openness to international trade, and faster technological progress tend to …