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Diverse Organizations And The Competition For Talent

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  • Jan Eeckhout
  • Roberto Pinheiro

Abstract

We propose a theory of firm production that requires diverse inputs. We show that in a competitive labor market, firms differ in their skill composition. Organizations with higher total factor productivity (TFP) are larger and hire from a broader range of skills. Technological progress leads to an increase of all wages and results in downsizing. Quantifying productivity using our model shows that a constant elasticity of substitution (CES) production function generates unbiased estimates of TFP but biased estimates of marginal product and elasticity of substitution across skills. Our model also generates estimates of the TFP distribution based on CEO compensation alone.

Suggested Citation

  • Jan Eeckhout & Roberto Pinheiro, 2014. "Diverse Organizations And The Competition For Talent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 625-664, August.
  • Handle: RePEc:wly:iecrev:v:55:y:2014:i::p:625-664
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    File URL: http://hdl.handle.net/10.1111/iere.12065
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    Cited by:

    1. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 872-906.
    2. Jan Eeckhout & Roberto Pinheiro & Kurt Schmidheiny, 2010. "Spatial Sorting: Why New York, Los Angeles and Detroit Attract the Greatest Minds as well as the Unskilled," CESifo Working Paper Series 3274, CESifo Group Munich.
    3. Philipp Kircher & Jan Eeckhout, 2011. "Sorting and Factor Intensity: Production and Unemployment across Skills," 2011 Meeting Papers 792, Society for Economic Dynamics.
    4. Murat Tasci & Roberto Pinheiro, 2019. "Firms, Skills, and Wage Inequality," Working Papers 170601, Federal Reserve Bank of Cleveland, revised 19 Apr 2019.

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