How Missing Markets of Managerial Talent Can Lead to Generalist Careers

In this paper, we document how the thinness of the labor market leads to managers in smaller towns becoming more generalist in their careers. Drawing upon the literature on the economics of agglomeration we propose that high quality managerial talent and a wider range of jobs will be more concentrated in larger cities relative to smaller towns, thereby creating relatively thinner markets for managerial talent in smaller towns. Due to this spatial sorting of talent, compared to firms in larger cities, firms located in smaller towns will have limited access to a pool of high-ability, high-fit candidates and will be more likely to recruit individuals that do not have relevant job experience in the area of interest (low fit) despite having high ability. They will thus require a change in functional areas of these individuals. From the workers' perspective, due to a lower concentration of jobs in smaller towns workers will have a narrower range of jobs to choose from than in larger cities. Many workers will be less likely to match with jobs that perfectly align with their prior experience. To remain employed, such workers will need to functionally diversify. Using the quasi-random assignment feature in the context of Indian Administrative Services (IAS), we disentangle inherent quality differences between individuals from their locational preferences, which enables us to move closer to a causal inference on the influence of geography on the likelihood of change in functional area and becoming a generalist. By examining the career trajectories of 4,244 officers from IAS, we find support for our argument. The key contributions of this paper are to provide novel evidence on how labor market differences arising from locations is an antecedent to functional diversification, and to provide evidence on explanatory mechanisms. Our finding that the careers of individuals are also likely to differ by geography adds to the literature on human capital development, and agglomeration economies, which has documented other ways that labor markets differ by geography such as productivity, innovation, wages, and industry concentration. Last, our paper has policy implications as it implies that opportunities for career progression, such as being able to change functional areas, could act as a demand side factor that triggers mobility to smaller towns for individuals with high general human capital.