Informal Incentives, Labor Supply, and the Effect of Immigration on Wages

Abstract : This paper theoretically investigates how an increase in the supply of homogenous workers can raise wages, generating new insights on potential drivers for the observed non-negative wage effects of immigration. We develop a model of a labor market with frictions in which firms can motivate workers only through informal incentives. A higher labor supply increases firms' chances of filling a vacancy, which reduces their credibility to compensate workers for their effort. As a response, firms endogenously generate costs of turnover by paying workers a rent, and this rent is higher if an increase in labor supply reduces a firm's credibility. By this effect, a higher labor supply — for example caused by immigration — can increase workers' compensation. Moreover, an asymmetric equilibrium exists in which native workers are paid higher wages than immigrants and work harder. In such an equilibrium, an inflow of immigrants increases productivity, profits, and employment.

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Talent Hoarding in Organizations

Abstract : Most organizations rely on managers to identify talented workers, but worker departures can be costly and managers are typically not rewarded for developing talent. Consequently, managers may have incentives to hoard talented workers, jeopardizing the efficient allocation of talent within firms. This study demonstrates the existence of talent hoarding by using the universe of application and hiring decisions at a large manufacturing firm. When managers rotate to a new position and temporarily stop hoarding talent, workers’ applications for promotions increase by 128%, suggesting that managers deter a large group of workers from applying. Talent hoarding leads to misallocation of talent within the firm and is particularly consequential for women. Marginal female applicants, who would not have applied in the absence of manager rotations, are almost twice as likely to land a promotion, and ultimately outperform their male counterparts in their new positions. These findings demonstrate the importance of applications as a mediating mechanism for talent hoarding: the gender gap in career progression among marginal applicants is 91% smaller than in the counterfactual in which they do not apply.

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Ai Assistance, Employee Creativity, and Job Performance: Evidence from a Field Experiment

Abstract : Can artificial intelligence (AI) create complementarity with human employees by assisting them at work, and if so, how and when? We examine AI assistance in a sequential division of labor within organizations, wherein AI handles the initial portion of a task that is repetitive and well-codified so that employees can focus on subsequent higher-level problem solving. This organizational design can help overcome both AI’s limitations in performing higher-level problem solving and humans’ boredom with repetitive work. We provide causal evidence from a field experiment in a telemarketing firm which randomly assigned AI assistance to generate sales leads in the first stage (a well-codified and repetitive portion of the sales task) and then handed over the leads to human employees for sales persuasion in the second stage (which required higher-level problem solving). We find that AI assistance can significantly increase employee creativity in answering customers’ questions, but only for top employees serving difficult customers. Moreover, AI assistance increases employee efficiency only for bottom employees serving easy customers. In both cases, AI assistance increased employee performance. We thus highlight employee capabilities and customer types as critical scope conditions for attaining complementarity between AI and humans in problem solving. Policy simulation results suggest that the AI-human team can be optimized by matching AI assistance with the right employees and the right customers. These findings offer useful implications for organizations to generate augmented intelligence and achieve optimal performance from AI-human collaborations.

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