Sorting in the U.S. Corporate Executive Labor Market
59 Pages Posted: 10 Oct 2014 Last revised: 21 Oct 2017
Date Written: February 1, 2016
This paper measures the degree of sorting by skill in the U.S. labor market for senior managers. I utilize both wage data and a comprehensive dataset that contains education information on 10,517 executives. I present evidence of a high degree of within-firm positive sorting: better managers are matched with better coworkers. Sorting significantly contributes to variation in productivity across firms and explains a large portion of observed differences in TFP. In addition, sorting explains 20% of variation in compensation. I consider several explanations and suggest that the findings are most easily explained by complementarities in production within executive teams.
Keywords: Managerial talent, complementarities in production, assortative matching, executive compensation, director compensation, structural estimation
JEL Classification: G32, M12, M52
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