Selecting the Best: The Persistent Effects of Luck

Mikhail Drugov, Margaret Meyer and Möller, Marc

No 19309, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Organizational learning; Incentives; Selective efficiency; Discrimination; Inequality (search for similar items in EconPapers)
JEL-codes: D21 D82 D83 J70 M51 (search for similar items in EconPapers)
Date: 2024-07
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Working Paper: Selecting the Best: The Persistent Effects of Luck (2024)
Working Paper: Selecting the Best: The Persistent Effects of Luck (2024)
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