Stable Matching on the Job? Theory and Evidence on Internal Talent Markets

90 Pages Posted: 19 Apr 2021 Last revised: 30 Nov 2023

See all articles by Bo Cowgill

Bo Cowgill

Columbia University - Columbia Business School

Jonathan Davis

University of Chicago - Harris School of Public Policy; University of Chicago - Harris School of Public Policy

B. Pablo Montagnes

Emory University - Department of Political Science

Patryk Perkowski

Yeshiva University

Multiple version iconThere are 3 versions of this paper

Date Written: April 5, 2021

Abstract

A principal often needs to match agents to perform coordinated tasks, but agents can quit or slack off if they dislike their match. We study two prevalent approaches for matching within organizations: Centralized assignment by firm leaders and self-organization through market-like mechanisms. We provide a formal model of the strengths and weaknesses of both methods under different settings, incentives, and production technologies. The model highlights tradeoffs between match-specific productivity and job satisfaction. We then measure these tradeoffs with data from a large organization's internal talent market. Firm-dictated matches are 33% more valuable than randomly assigned matches within job categories (using the firm's preferred metric of quality). By contrast, preference-based matches (using deferred acceptance) are only 5% better than random but are ranked (on average) about 38 percentiles higher by the workforce. The self-organized match is positively assortative and helps workers grow new skills; the firm's preferred match is negatively assortative and harvests existing expertise.

Keywords: internal labor markets, assortative matching, market design

JEL Classification: M5, D47, J4

Suggested Citation

Cowgill, Bo and Davis, Jonathan and Montagnes, B. Pablo and Perkowski, Patryk, Stable Matching on the Job? Theory and Evidence on Internal Talent Markets (April 5, 2021). Columbia Business School Working Paper, Available at SSRN: https://ssrn.com/abstract=3793899 or http://dx.doi.org/10.2139/ssrn.3793899

Bo Cowgill (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Jonathan Davis

University of Chicago - Harris School of Public Policy ( email )

1155 E 60th St
Chicago, IL 60637
United States

University of Chicago - Harris School of Public Policy ( email )

1155 E 60th St
Chicago, IL 60637
United States

B. Pablo Montagnes

Emory University - Department of Political Science ( email )

Atlanta, GA 30322
United States

Patryk Perkowski

Yeshiva University ( email )

500 West 185th Street
New York, NY 10033
United States

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