Career Lotto: Labor Supply in Winner-Take-All Markets

43 Pages Posted: 23 Jan 2019

See all articles by Wayne A. Grove

Wayne A. Grove

Le Moyne College - Department of Economics

Michael Jetter

University of Western Australia; IZA

Kerry L. Papps

Cornell University; IZA Institute of Labor Economics

Abstract

Are people prone to selecting occupations with highly skewed income distributions despite minuscule chances of success? Assembling a comprehensive pool of potential teenage entrants into professional tennis (a typical winner-take-all market), we construct objective measures of relative ability and earnings projections. We find that prospective tennis professionals are attracted to right-skewed earnings distributions, independent of mean and variance. If skewness in prize money fell to zero, males would be 23% and females 5% less likely to continue pursuing a professional career, on average. Thus, winner-take-all labor markets appear to systematically encourage those with modest talents to pursue long-shot careers.

Keywords: winner-take-all markets, superstar markets, labor supply, human capital, gender differences, skewness preferences

JEL Classification: J22, J24, J31, J44, L83

Suggested Citation

Grove, Wayne A. and Jetter, Michael and Papps, Kerry L., Career Lotto: Labor Supply in Winner-Take-All Markets. IZA Discussion Paper No. 12012. Available at SSRN: https://ssrn.com/abstract=3318766

Wayne A. Grove (Contact Author)

Le Moyne College - Department of Economics ( email )

1419 Salt Springs Road
Syraucse, NY 13214

HOME PAGE: http://webserver.lemoyne.edu/grovewa/

Michael Jetter

University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

Kerry L. Papps

Cornell University ( email )

Ithaca, NY 14853
United States

IZA Institute of Labor Economics

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

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