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Incentives to Discover Talent

Author

Listed:
  • Tobias Brünner
  • Guido Friebel
  • Richard Holden
  • Suraj Prasad

Abstract

We study an agent’s incentives to discover where her talents lie before putting them to productive use. In our setting, an agent can specialize and learn about the same type of talent repeatedly, or experiment and learn about different types of talent. While experimentation is efficient for a range of distributions of talent and initial signals, labor-market institutions play a crucial role for individual incentives to experiment. Institutions that give the agent sufficiently large bargaining power, provide incentives for experimentation, but for weak bargaining power, agents specialize. We also look at how competition in the labor market, human capital accumulation, and correlation across talents affect incentives to experiment. (JEL codes: D83; J24; J42)

Suggested Citation

  • Tobias Brünner & Guido Friebel & Richard Holden & Suraj Prasad, 2022. "Incentives to Discover Talent," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 38(2), pages 309-344.
    • Handle: RePEc:oup:jleorg:v:38:y:2022:i:2:p:309-344.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewab004
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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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