The Survival of Mediocre Superstars in the Labor Market

Tinbergen Institute Discussion Paper 2017-116/VII

56 Pages Posted: 12 Dec 2017 Last revised: 17 Nov 2021

See all articles by Thomas Peeters

Thomas Peeters

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); University of Antwerp - Department of Economics

Stefan Szymanski

University of Michigan at Ann Arbor

Marko Terviö

Aalto University

Date Written: December 8, 2017

Abstract

We argue that liquidity constrained firms face strong incentives to hire experienced, but low ability workers instead of novice workers with higher upside potential. Using four decades of high-frequency information on worker performance in a ‘superstar’ labor market allows us to estimate the revealed ability of experienced workers at the time they are hired by a new firm. More than one fifth of these hires are “substandard” in that the revealed ability of the hired experienced worker lies below the mean ability of recent novices. Even more hires (around 40 percent) are “mediocre”, as their ability falls short of the hiring threshold that maximizes the long-run average ability of the active workforce. Replacing mediocre hires by novice workers would increase the average ability of the workforce by 0.1 standard deviations.

Keywords: hiring, labor market entry, superstars, football

JEL Classification: M51, J63, J24, Z22

Suggested Citation

Peeters, Thomas and Szymanski, Stefan and Terviö, Marko, The Survival of Mediocre Superstars in the Labor Market (December 8, 2017). Tinbergen Institute Discussion Paper 2017-116/VII, Available at SSRN: https://ssrn.com/abstract=3084635 or http://dx.doi.org/10.2139/ssrn.3084635

Thomas Peeters (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

Stefan Szymanski

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Marko Terviö

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
184
Abstract Views
923
rank
210,013
PlumX Metrics