published as "Firm Size, Productivity, and Manager Wages: A Job Assignment Approach" in: B.E. Journal of Theoretical Economics: Advances in Theoretical Economics, 2007, 7 (1), Article 8
This paper develops a model with multiple market locations in which the quality of intangible
assets of firms, provided by management, determines the firms’ performance. Despite an ex
ante symmetry of potential entrants, the equilibrium assignment of heterogeneous
managerial skills to firms tends to be asymmetric. This sorting outcome determines both the
goods market structure at single locations and the size distribution of firms. Results are
consistent with a number of observed patterns regarding the size distribution of firms and
establishments, and the relation of firm size to profitability, productivity, managerial skills and
manager remuneration.
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