9th Nordic Summer Symposium in Macroeconomics, Smögen, Sweden - A Tale of Two C(. . . )s: Competence and Complementarity - Research presentation

In collaboration with Fane Groes from the Copenhagen Business School in Denmark, the project analyzes the allocation of entrepreneurial and managerial talent to firms and establishments and quantifies the effect of labor market frictions on aggregate productivity, making extensive use of a dataset that covers the complete work histories of the entire Danish labor force between 2000 and 2009. Differences in aggregate productivity account for the bulk of the vast income difference observed in the data across time and space. Yet differences in aggregate productivity are also a measure of our ignorance: they reveal how much of a particular income gap (measure by GDP per capita) that cannot be explained after taking the salient differences in human and physical capital (structures, equipment, infrastructure) into account. In an attempt to shed more light on this residual gap, this project quantifies how costly the misallocation of human capital in the form of entrepreneurial or managerial ability across firms and establishments is.