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The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment

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Author Info
Katsuya Takii (Osaka School of International Public Policy (OSIPP))

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Abstract

In this paper, we construct a dynamic assignment model that can provide a unified explanation of persistent differences in productivity, wages, skill mixes and profits between firms in a changing and uncertain environment. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital, in turn, confirms high expectations. This positive feedback brings about persistent differences in these variables in an uncertain environment. We estimate parameters and simulate the model. Our results show that a positive assignment mechanism accounts for a large part of the observed persistence; the difficulty of estimating organization capital plays only an auxiliary role.

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Publisher Info
Paper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 08E003.

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Length: 50 pages
Date of creation: Feb 2008
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Handle: RePEc:osp:wpaper:08e003

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Related research
Keywords: Organization Capital Assignment Persistence

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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  8. Sattinger, Michael, 1979. "Differential Rents and the Distribution of Earnings," Oxford Economic Papers, Oxford University Press, vol. 31(1), pages 60-71, March. [Downloadable!] (restricted)
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  11. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January. [Downloadable!] (restricted)
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  12. Acemoglu, Daron, 1997. " Matching, Heterogeneity, and the Evolution of Income Distribution," Journal of Economic Growth, Springer, vol. 2(1), pages 61-92, March. [Downloadable!] (restricted)
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  15. Eve Caroli & John Van Reenen, 2001. "Skill-Biased Organizational Change? Evidence From A Panel Of British And French Establishments," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1449-1492, November. [Downloadable!] (restricted)
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  16. Takii, Katsuya, 2007. "The value of adaptability--Through the analysis of a firm's prediction ability," Journal of Economics and Business, Elsevier, vol. 59(2), pages 144-162. [Downloadable!] (restricted)
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