Dynamic Sorting

Moritz Meyer-ter-Vehn, Lee Ohanian and Simeon Alder
Additional contact information
Moritz Meyer-ter-Vehn: UCLA

No 518, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We introduce a novel assignment model to understand patterns of firm growth and entrepreneurial (managerial) turnover. The economy is endowed with a measure of en- trepreneurs who are distinct in two dimensions: they vary in their skill e to operate a given technology and in their ability to innovate, q. In addition, the economy is populated by an endogenous distribution of firms with exogenous entry and exit. High-q entrepreneurs are more likely to grow their form than a low-q manager. The entrepreneurs’ e and q attributes are not perfectly correlated, in general, and the planner faces an assignment trade-off between maximizing current output and fostering innovation. Since entry and exit are exogenous, our theory emphasizes survivor growth over selection to account for the life cycle of firms. The model makes sharp predictions for the handover of firms from relatively "innovative" entrepreneurs to more "efficient" managers. In an extension we characterize the effects on optimal matching introduced by match-specific capital, learn- ing about managerial types, financial constraints, and contractual frictions.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (3)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:518

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().