Selecting the Best: The Persistent Effects of Luck
Mikhail Drugov, Margaret Meyer, and Marc Möller
CEPR Discussion Paper 19309
We analyze a model of organizational learning where agents’ performance reflects time-invariant unobservable ability, privately-chosen effort, and noise. Our main result is that, even when performance is almost entirely random, maximizing the probability of identifying the best agent (“selective efficiency”) requires biasing final selection in favor of early winners. Making luck persistent, e.g. through fast-tracks, is thus rationalized by the pursuit of selective efficiency. Agents’ strategic efforts amplify the persistence of luck. Organizational learning also affects the persistence of initial advantages stemming from identity. Identity-dependent biases, e.g. gender-specific mentoring, create incentives that make selection both more efficient and more equitable
The Effect of Occupational Choice and Stereotypes on Labor Market Sorting
Oleg Muratov and Marc Möller
We incorporate worker’s competition for jobs into an assignment model to investigate the implications of occupational choice for the matching between workers of heterogeneous talent and firms of heterogeneous productivity. Positive assortative matching emerges when occupational choice is without frictions. We characterize the distortions that arise when entry into an occupation is costly for a group of workers, for instance due to the existence of stereotypes. Stereotypes affect all workers—not only those who experience them–through their influence on workers’ sorting across occupations and our theory explains how the effects differentiate across workers’ of differing talent.
Procuring New Ideas: The Value of Performance Information in Innovation Tournaments
Martina Bossard, Marc Möller, and Catherine Roux
Coming Soon!