The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment

Katsuya Takii

No 08E003, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

Abstract: In this paper, we construct a dynamic assignment model that can provide a unified explanation of persistent differences in productivity, wages, skill mixes and profits between firms in a changing and uncertain environment. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital, in turn, confirms high expectations. This positive feedback brings about persistent differences in these variables in an uncertain environment. We estimate parameters and simulate the model. Our results show that a positive assignment mechanism accounts for a large part of the observed persistence; the difficulty of estimating organization capital plays only an auxiliary role.

Keywords: Organization Capital; Assignment; Persistence (search for similar items in EconPapers)
JEL-codes: J24 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-knm and nep-lab
Date: 2008-02
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Persistent link: http://EconPapers.repec.org/RePEc:osp:wpaper:08e003

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