Faculty of Economics and Business Administration Publications Database

Incentives to Discover Talent

Holden, Richard
Prasad, Suraj
ISSN-Print: 8756-6222
Link External Source: Online Version
Year: 2021

We study an agent’s incentives to discover where her talents lie before putting them to productive use. In our setting, an agent can specialize and learn about the same type of talent repeatedly, or experiment and learn about different types of talent. While experimentation is efficient for a range of distributions of talent and initial signals, labor-market institutions play a crucial role for individual incentives to experiment. Institutions that give the agent sufficiently large bargaining power, provide incentives for experimentation, but for weak bargaining power, agents specialize. We also look at how competition in the labor market, human capital accumulation, and correlation across talents affect incentives to experiment.