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Career Lotto: Labor Supply in Winner-Take-All Markets

Wayne A. Grove (), Michael Jetter () and Kerry Papps ()
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Wayne A. Grove: Le Moyne College

No 12012, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: Are people prone to selecting occupations with highly skewed income distributions despite minuscule chances of success? Assembling a comprehensive pool of potential teenage entrants into professional tennis (a typical winner-take-all market), we construct objective measures of relative ability and earnings projections. We find that prospective tennis professionals are attracted to right-skewed earnings distributions, independent of mean and variance. If skewness in prize money fell to zero, males would be 23% and females 5% less likely to continue pursuing a professional career, on average. Thus, winner-take-all labor markets appear to systematically encourage those with modest talents to pursue long-shot careers.

Keywords: winner-take-all markets; superstar markets; labor supply; human capital; gender differences; skewness preferences (search for similar items in EconPapers)
JEL-codes: J22 J24 J31 J44 L83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma and nep-spo
Date: 2018-12
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