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 competition for jobs into an assignment model to investigate the implications of occupational choice for the matching between heterogeneous workers and jobs of differing quality. When occupational choice is without frictions, more able workers choose more (costly) education and workers sort across occupations in a way that induces positive assortative matching. We characterize the distortions that arise when entry into an occupation is costly for a group of workers, e.g. due to the existence of stereotypes. The associated utility-loss is increasing with a worker’s ability because, although high-ability workers obtain jobs of similar quality as in the absence of stereotypes, competition for those jobs turns out to be stronger.
Procuring New Ideas: The Value of Performance Information in Innovation Tournaments
Martina Bossard, Marc Möller, and Catherine Roux
Coming Soon!