On the Distribution of Income and Worker Assignment Under Intra-Firm Spillovers, with an Application to Ideas and Networks

UPF Economics and Business Working Paper No. 417

46 Pages Posted: 26 May 2000

See all articles by Gilles Saint-Paul

Gilles Saint-Paul

University of Toulouse I - GREMAQ-IDEI; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: October 5, 1999

Abstract

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

Keywords: Income distribution, worker assignment, stratification, networks, information technology

JEL Classification: J3

Suggested Citation

Saint-Paul, Gilles, On the Distribution of Income and Worker Assignment Under Intra-Firm Spillovers, with an Application to Ideas and Networks (October 5, 1999). UPF Economics and Business Working Paper No. 417. Available at SSRN: https://ssrn.com/abstract=224428 or http://dx.doi.org/10.2139/ssrn.224428

Gilles Saint-Paul (Contact Author)

University of Toulouse I - GREMAQ-IDEI ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France
+33 5 6112 8544 (Phone)
+33 5 6122 5563 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
74
Abstract Views
1,185
rank
317,342
PlumX Metrics