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Quantifying the Benefits of Entry into Local Phone Service

  • Nicholas Economides
  • Katja Seim
  • V. Brian Viard

An increasingly important organisational design problem for many firms is to recoup general human capital rents while maintaining attractive career prospects for workers. We explore the role of information management in this context. In our model, an information management policy determines the statistic of worker performance that will be available to outside recruiters. Choosing different statistics affects the extent of regression to the mean which, we show, in turn affects the incidence of adverse selection among retained and released workers. Using this observation, we detail how optimal information management policies vary across firms with different human capital management priorities. This view of human capital management via information management has strong implications for labour market outcomes. We discuss the impact on average wages, wage inequality, wage skewness and labour turnover rates.

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File URL: http://www.stern.nyu.edu/networks/Local_Telecommunications.pdf
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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 07-28.

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Date of creation: 2007
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Handle: RePEc:ste:nystbu:07-28
Contact details of provider: Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/

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