On the Distribution of Income and Worker Assignment under Intra-Firm Spillovers, with an Application to Ideas And Networks

Gilles Saint-Paul

No 2290, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the earnings structure and the equilibrium assignment of workers when they exert intra-firm spillovers on each other. We allow for arbitrary spillovers provided output depends on some aggregate index of workers' skill. Despite the possibility of increasing returns to skills, equilibrium typically exists. We show that equilibrium will typically be segregated; that the skill space can be partitioned into a set of segments and any firm hires from only one segment. Next, we apply the model to analyze the effect of information technology on segmentation and the distribution of income. There are two types of human capital, productivity and creativity, i.e. the ability to produce ideas that may be duplicated over a network. Under plausible assumptions, inequality rises and then falls when network size increases, and the poorest workers cannot lose. We also analyze the impact of an improvement in worker quality and of an increased international mobility of ideas.

Keywords: Income Distribution; Increasing Returns; Information Technology; Networks; Segregation; Spilllovers; Stratification; Worker Assignment (search for similar items in EconPapers)
JEL-codes: J3 (search for similar items in EconPapers)
Date: 1999-11
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: On the Distribution of Income and Worker Assignment under Intrafirm Spillovers, with an Application to Ideas and Networks (2001)
Working Paper: On the distribution of income and worker assignment under intra-firm spillovers, with an application to ideas and networks (1999)
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