First in Village or Second in Rome?

26 Pages Posted: 1 Mar 2010

See all articles by Ettore Damiano

Ettore Damiano

University of Toronto - Department of Economics

Hao Li

University of Toronto - Department of Economics; Queen's University - Department of Economics

Wing Suen

The University of Hong Kong - School of Economics and Finance

Abstract

Though individuals prefer high-quality peers, there are advantages to being high up in the pecking order within a group. In this environment, sorting of agents yields an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. With transfers, this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation. More egalitarianism within organizations induces greater segregation across organizations, but can improve the allocation efficiency. Since competition is most intense for intermediate talent, effective personnel policies differ systematically between high-quality and low-quality organizations.

Suggested Citation

Damiano, Ettore and Li, Hao and Suen, Wing C., First in Village or Second in Rome?. International Economic Review, Vol. 51, Issue 1, pp. 263-288, February 2010. Available at SSRN: https://ssrn.com/abstract=1560179 or http://dx.doi.org/10.1111/j.1468-2354.2009.00579.x

Ettore Damiano (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-946-5821 (Phone)
416-978-6713 (Fax)

Hao Li

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-5105 (Phone)

Queen's University - Department of Economics ( email )

Dunning Hall
Kingston, Ontario K7L 3N6
Canada
613-533-2275 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://www.econ.queensu.ca/pub/faculty/li/

Wing C. Suen

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
852 2859 1052 (Phone)
852 2548 1152 (Fax)

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