Career Concerns and the Nature of Skills
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mic.20160277.pdf
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740.77 KB
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Adobe PDF
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Author(s)
Cisternas Leyton, Gonzalo Sebastian
Date Issued
May 2018
Journal
American Economic Journal: Microeconomics
Publisher
American Economic Association
Citation
Cisternas, Gonzalo. “Career Concerns and the Nature of Skills.” American Economic Journal: Microeconomics 10, 2 (May 2018): 152–189 © 2018 American Economic Association
Version
Final published version
Abstract
I examine how career concerns are shaped by the nature of productive actions taken by workers. A worker's skills follow a Gaussian process with an endogenous component reflecting human-capital accumulation. Effort and skills are substitutes both in the output process (as in Holmstrom 1999) and in the skills technology. The focus is on deterministic equilibria by virtue of Gaussian learning. When effort and skills are direct inputs to production and skills are exogenous, effort can be inefficiently high in the beginning of a career. In contrast, when skills are the only input to production but accumulate through past effort choices, the worker always underinvests in skill acquisition. At the center of the discrepancy are two types of ex post errors that arise at interpreting output due to an identification problem faced by the market. Finally, the robustness of the underinvestment result is explored via variations in the skill-accumulation technology and in the information structure, and policy implications are discussed.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/MIC.20160277
