Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324314 
Year of Publication: 
2025
Series/Report no.: 
RF Berlin - CReAM Discussion Paper Series No. 32/25
Publisher: 
Rockwool Foundation Berlin (RF Berlin) and Centre for Research & Analysis of Migration (CReAM), Berlin and London
Abstract: 
Managers ("bosses") are central to the development and allocation of human capital in firms because they train employees and learn about their abilities. While a multi-divisional firm wants to allocate workers to wherever they are most productive, bosses who are rewarded for their units' performance prefer to hold on to good employees, and the prospect of losing good people weakens the incentives to train them. We derive the optimal incentive contract for bosses that enables a firm to change from "silos" with only upward mobility to a "lattice" with cross-divisional mobility. Compared to silos, a lattice achieves a more efficient allocation of people to positions, but also entails agency costs that may exceed the benefits. We suggest empirical predictions about when silos or a lattice are optimal, and relate our model and its results to examples and evidence.
Subjects: 
tourism
job growth
unemployment
heterogeneity
natural resource curse
JEL: 
R11
J21
R12
R23
Z30
Document Type: 
Working Paper

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