Firms, Assignments, and Earnings

Prescott, Edward S.

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Firms, Assignments, and Earnings

FRB Richmond Economic Quarterly, Vol. 89, No. 4, Fall 2003, pp. 69-81

13 Pages Posted: 5 Dec 2012

See all articles by Edward S. Prescott

Edward S. Prescott

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: 2003

Abstract

Earnings within a firm usually increase with job rank. Earnings across firms usually increase with firm size. An assignment model addresses these facts. People are assigned to firms and to jobs within these firms by their managerial talent. In equilibrium, higher quality managers are assigned more workers and their pay increases more than proportionally with their talent. Special attention is devoted to the connection between firm size and the level of executive pay.

Suggested Citation: Suggested Citation

Prescott, Edward (Ned) Simpson, Firms, Assignments, and Earnings (2003). FRB Richmond Economic Quarterly, Vol. 89, No. 4, Fall 2003, pp. 69-81, Available at SSRN: https://ssrn.com/abstract=2184912