DP13954 Task Discretion, Labor Market Frictions and Entrepreneurship

Author(s): Andrea Canidio, Patrick Legros
Publication Date: August 2019
Date Revised: September 2019
Keyword(s): entrepreneurial failures, entrepreneurship, labor-market frictions, learning, organizational choice, Task discretion
JEL(s): D83, J24, J62, J63, L26, M13
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13954

Each job can be performed in several ways, which we call tasks An agent's performance at a task is informative about his productivity at different tasks. But tasks are not contractible: choosing tasks is the prerogative of management within firms, and of the agent if he is an entrepreneur. Firms will invest in the discovery of their workers' productivity at different tasks only if they cannot easily move to other firms. Therefore, labor-market frictions determine whether learning an agent's talent occur within firms, or whether an agent may become an entrepreneur to acquire task discretion.