The strategic decentralization of recruiting

• 成果类型: Article
• 署名作者: Chen, Yi; Jungbauer, Thomas; Wang, Zhe
• 署名单位: Cornell University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105639
• 发表日期: 2023
• 关键词: Strategic delegation; market power; Recruiting; decentralization; labor share; Wage floor

摘要

We propose a model of strategic delegation in professional labor markets in which big and fringe firms compete for heterogeneous workers. In this context, big firms decide whether to exercise their market power to suppress wages (wage suppression) or to delegate hiring to divisions, thereby committing to bidding more fiercely for more skilled workers (talent acquisition). This reduces the incentive for other firms to go toe -to-toe with the decentralizing firm. In equilibrium, a big firm commanding labor market power opts for either of these two strategies. We find that the presence of a big firm in the labor market is detrimental to social welfare only if its size exceeds the tipping point beyond which it ceases to decentralize. Moreover, our model is compatible with recent studies that negatively link labor market concentration and labor share. Finally, the introduction of a wage floor encourages the big firm to decentralize, increasing match quality, such that social welfare may increase despite a drop in employment.(c) 2023 Elsevier Inc. All rights reserved.