Managerial Job Assignment and Imperfect Competition in Asymmetric Equilibrium

IZA Discussion Paper No. 738; CESifo Working Paper Series No. 914

41 Pages Posted: 8 Apr 2003

See all articles by Volker Grossmann

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2003

Abstract

This paper develops a tractable general equilibrium model with multiple market locations in which the interplay between product markets and the market for managerial skills determines both the size distribution of firms and top wage income shares. Despite ex ante symmetry of potential entrants, the analysis suggests that skewness in the distributions of firm size and wages naturally arises when differences among firms in productivity or product quality become increasingly magnified in profit differences, a property which is inherent in standard models of imperfect competition. Results are also consistent with a positive relationship of firm size to both productivity and profitability. Moreover, the analysis suggests that lean management is associated with high wages at the top, whereas a decline in set up costs to enter markets has inconclusive effects on inequality.

Keywords: Asymmetric equilibrium, Firm size, Intangible assets, Job assignment, Monopolistic competition, Top wage incomes

JEL Classification: D40, J31, L16

Suggested Citation

Grossmann, Volker, Managerial Job Assignment and Imperfect Competition in Asymmetric Equilibrium (April 2003). IZA Discussion Paper No. 738; CESifo Working Paper Series No. 914, Available at SSRN: https://ssrn.com/abstract=392022 or http://dx.doi.org/10.2139/ssrn.392022

Volker Grossmann (Contact Author)

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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