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

Posted: 26 Sep 2001

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

Abstract

I study the earnings structure and the equilibrium assignment of workers when workers exert intrafirm spillovers on each other. I allow for arbitrary spillovers, provided that output depends on some aggregate index of workers' skill. Despite the possibility of increasing returns to skills, equilibrium typically exists. I show that equilibrium will typically be segregated and that the skill space can be partitioned into a set of segments and any firm hires from only one segment. Next, I 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, that is, 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. I also analyze the impact of an improvement in worker quality and of an increased international mobility of ideas.

Suggested Citation

Saint-Paul, Gilles, On the Distribution of Income and Worker Assignment Under Intrafirm Spillovers, with an Application to Ideas and Networks. Journal of Political Economy, Vol. 109, No. 1, February 2001. Available at SSRN: https://ssrn.com/abstract=256548

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

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