Diverse Organizations and the Competition for Talent

40 Pages Posted: 30 Jul 2014

See all articles by Jan Eeckhout

Jan Eeckhout

University College London - Department of Economics

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Multiple version iconThere are 2 versions of this paper

Date Written: August 2014

Abstract

We propose a theory of firm production that requires diverse inputs. We show that in a competitive labor market, firms differ in their skill composition. Organizations with higher total factor productivity (TFP) are larger and hire from a broader range of skills. Technological progress leads to an increase of all wages and results in downsizing. Quantifying productivity using our model shows that a constant elasticity of substitution (CES) production function generates unbiased estimates of TFP but biased estimates of marginal product and elasticity of substitution across skills. Our model also generates estimates of the TFP distribution based on CEO compensation alone.

Suggested Citation

Eeckhout, Jan and Pinheiro, Roberto, Diverse Organizations and the Competition for Talent (August 2014). International Economic Review, Vol. 55, Issue 3, pp. 625-664, 2014, Available at SSRN: https://ssrn.com/abstract=2473848 or http://dx.doi.org/10.1111/iere.12065

Jan Eeckhout (Contact Author)

University College London - Department of Economics ( email )

30 Gordon Street
London WC1E 6BT, WC1H 0AX
United Kingdom

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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