Inefficient Labor Market Sorting / Carsten Eckel, Stephen Yeaple.

Format:

Book

Author/Creator:

Eckel, Carsten.

Contributor:

Yeaple, Stephen.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32797.

NBER working paper series no. w32797

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

A growing empirical literature attributes much of the productivity advantages of large, "superstar" firms to their adoption of best practice management techniques that allow them to better identify and use talented workers. The reasons for the incomplete adoption of these "structured management practices" (SMPs) and their welfare implications are not well understood. This paper provides a positive and normative analysis of these issues in a theoretical framework in which SMPs induce sorting of talent across firms. Incomplete adoption arises because SMPs are costly and worker talent is in limited supply. In equilibrium there is excessive adoption of SMPs and too much sorting of talented workers into large firms. In this second-best environment, policy changes that favor large firms, such as trade liberalization, have the potential to lower welfare.

Notes:

August 2024.

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