On the Distribution of Income and Worker Assignment under Intra-firm Spillovers, with an Application to Ideas and Networks

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On the Distribution of Income and Worker Assignment under Intra-firm Spillovers, with an Application to Ideas and Networks

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Gilles Saint Paul

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Gilles Saint-Paul

Abstract

We study the earnings structure and the equilibrium assignment of workers when workers exert intra-firm spillovers on each other. We allow for arbitrary spillovers provided output depends on some aggregate index of workers' skill. Despite the possibility of increasing returns to skills, equilibrium typically exists. We show that equilibrium will typically be segregated; that the skill space can be partitioned into a set of segments and any firm hires from only one segment. Next, we apply the model to analyze the effect of information technology on segmentation and the distribution of income. There are two types of human capital, productivity and creativity, i.e. the ability to produce ideas that may be duplicated over a network. Under plausible assumptions, inequality rises and then falls when network size increases, and the poorest workers cannot lose. We also analyze the impact of an improvement in worker quality and of an increased international mobility of ideas.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 417.

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Date of creation: Oct 1999
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Handle: RePEc:upf:upfgen:417

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Article
- Gilles Saint-Paul, 2001. "On the Distribution of Income and Worker Assignment under Intrafirm Spillovers, with an Application to Ideas and Networks," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 1-37, February. [Downloadable!] (restricted)
Paper
- Saint-Paul, Gilles, 1999. "On the Distribution of Income and Worker Assignment under Intra-Firm Spillovers, with an Application to Ideas And Networks," CEPR Discussion Papers 2290, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

This paper has been announced in the following NEP Reports:

NEP-ALL-2000-03-06 (All new papers)
NEP-IND-2000-03-06 (Industrial Organization)
NEP-INO-2000-03-06 (Innovation)
NEP-LAB-2000-03-06 (Labour Economics)

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Judith Hellerstein & David Neumark, 2005. "Workplace Segregation in the United States: Race, Ethnicity, and Skill," NBER Working Papers 11599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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- Judith K. Hellerstein & David Neumark, 2008. "Workplace Segregation in the United States: Race, Ethnicity, and Skill," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 459-477, 04. [Downloadable!] (restricted)
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Cecilia García-Peñalosa, 2008. "Inequality and growth: Goal conflict or necessary prerequisite?," Working Papers 147, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
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Alison L Booth & Gylfi Zoega, 2005. "Worker Heterogeneity, Intra-firm Externalities and Wage Compression," Birkbeck Working Papers in Economics and Finance 0515, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
Allen R. Sanderson & John J. Siegfried, 2003. "Thinking About Competitive Balance," Working Papers 0318, Department of Economics, Vanderbilt University. [Downloadable!]
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