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Shining with the stars: Competition, screening, and concern for coworkers’ quality

Author

Listed:
  • Francesca Barigozzi

    (UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna)

  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study how workers' concern for coworkers' ability (CfCA) affects competition in the labor market. Two firms offer nonlinear contracts to a unit mass of prospective workers. Firms may differ in their marginal productivity, while workers are heterogeneous in their ability (high or low) and their taste for being employed by any of the two firms. Workers receive a utility premium when employed by the firm hiring most high-ability workers and suffer a utility loss if hired by its competitor. These premiums/losses are endogenously determined. We characterize contracts and workers' sorting into the two firms under complete and private information on workers' ability. We show that CfCA is detrimental to firms, but it benefits high-ability workers, especially when their ability is observable. In addition, CfCA exacerbates the existing distortion in high-ability workers' sorting into the two firms.

Suggested Citation

  • Francesca Barigozzi & Helmuth Cremer, 2024. "Shining with the stars: Competition, screening, and concern for coworkers’ quality," Post-Print hal-04454311, HAL.
    • Handle: RePEc:hal:journl:hal-04454311
    DOI: 10.1016/j.geb.2024.01.014
    Note: View the original document on HAL open archive server: https://hal.science/hal-04454311
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    More about this item

    Keywords

    Concern for coworkers’ quality; Competition; Screening; Sorting;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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