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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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  • Saint-Paul, Gilles

Abstract

We study the earnings structure and the equilibrium assignment of workers when they 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.

Suggested Citation

  • 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.
  • Handle: RePEc:cpr:ceprdp:2290
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    1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
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    Cited by:

    1. 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, August.
    2. Glitz, Albrecht, 2014. "Ethnic segregation in Germany," Labour Economics, Elsevier, vol. 29(C), pages 28-40.
    3. Booth, Alison L & Zoega, Gylfi, 2002. "If You're so Smart, Why Aren't You Rich? Wage Inequality with Heterogenous Workers?," CEPR Discussion Papers 3190, C.E.P.R. Discussion Papers.
    4. Antonio Cabrales & Antoni Calvó, 2002. "Social preferences and skill segregation," Economics Working Papers 629, Department of Economics and Business, Universitat Pompeu Fabra.
    5. Josef Falkinger & Volker Grossmann, 2003. "Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 523-544, September.
    6. Kaniska Dam, 2009. "Job Matching, Competition and Managerial Incentives," Working papers DTE 460, CIDE, División de Economía.
    7. Böheim, René & Horvath, Thomas & Mayr, Karin, 2014. "Birthplace Diversity and Productivity Spill-overs in Firms," IZA Discussion Papers 8463, Institute of Labor Economics (IZA).
    8. Christian Ahlin, 2017. "Matching Patterns When Group Size Exceeds Two," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 352-384, February.
    9. Michael Kosfeld & Ferdinand A. von Siemens, 2011. "Competition, cooperation, and corporate culture," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 23-43, March.
    10. Åslund, Olof & Nordström Skans, Oskar, 2005. "Will I see you at work? Ethnic workplace segregation in Sweden 1985–2002," Working Paper Series 2005:24, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    11. Cabrales, Antonio & Calvó-Armengol, Antoni, 2008. "Interdependent preferences and segregating equilibria," Journal of Economic Theory, Elsevier, vol. 139(1), pages 99-113, March.
    12. Sabrina Teyssier, 2008. "Les Modes de Rémunération comme MécanismesSélectifs de la Main d'oeuvre : Fondements Théoriques et Estimations Empiriques," Post-Print halshs-00303703, HAL.
    13. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    14. repec:pri:cepsud:113krusell is not listed on IDEAS
    15. Meir Russ, 2017. "The Trifurcation of the Labor Markets in the Networked, Knowledge-Driven, Global Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 672-703, June.
    16. Grossmann, Volker, 2003. "Managerial Job Assignment and Imperfect Competition in Asymmetric Equilibrium," IZA Discussion Papers 738, Institute of Labor Economics (IZA).
    17. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 12, pages 1043-1171, Elsevier.
    18. Alison L Booth & Gylfi Zoega, 2005. "Worker Heterogeneity, Intra-firm Externalities and Wage Compression," Birkbeck Working Papers in Economics and Finance 0515, Birkbeck, Department of Economics, Mathematics & Statistics.
    19. Berthold Norbert & Stettes Oliver, 2001. "Die betriebliche Mitbestimmung in Deutschland – eine richtige Reform in die falsche Richtung," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 52(1), pages 15-36, January.
    20. Allen R. Sanderson & John J. Siegfried, 2003. "Thinking about Competitive Balance," Journal of Sports Economics, , vol. 4(4), pages 255-279, November.
    21. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1383-1435.
    22. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The Effects of Technical Change on Labor Market Inequalities," Working Papers 89, Princeton University, Department of Economics, Center for Economic Policy Studies..
    23. Mayr-Dorn, Karin, 2019. "Immigration and wages: The role of endogenous worker assignment to firms," Economics Letters, Elsevier, vol. 183(C), pages 1-1.

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    More about this item

    Keywords

    Income Distribution; Increasing Returns; Information Technology; Networks; Segregation; Spilllovers; Stratification; Worker Assignment;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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