Access

You are not currently logged in.

Access JSTOR through your library or other institution:

login

Log in through your institution.

Journal Article

Superstars and Mediocrities: Market Failure in the Discovery of Talent

Marko Terviö
The Review of Economic Studies
Vol. 76, No. 2 (Apr., 2009), pp. 829-850
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/40247622
Page Count: 22
Were these topics helpful?
See somethings inaccurate? Let us know!

Select the topics that are inaccurate.

Cancel
  • Download ($42.00)
  • Subscribe ($19.50)
  • Add to My Lists
  • Cite this Item
Superstars and Mediocrities: Market Failure in the Discovery of Talent
Preview not available

Abstract

A basic problem facing most labour markets is that workers can neither commit to long-term wage contracts nor can they self-finance the costs of production. I study the effects of these imperfections when talent is industry-specific; it can only be revealed on the job, and once learnt becomes public information. I show that firms bid excessively for the pool of incumbent workers at the expense of trying out new talent. The workforce is then plagued with an unfavourable selection of individuals: there are too many mediocre workers, whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential. The result is an inefficiently low level of output coupled with higher wages for known high talents. This problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high. I argue that high incomes in professions such as entertainment, management, and entrepreneurship, may be explained by the nature of the talent revelation process, rather than by an underlying scarcity of talent.

Page Thumbnails

  • Thumbnail: Page 
829
    829
  • Thumbnail: Page 
830
    830
  • Thumbnail: Page 
831
    831
  • Thumbnail: Page 
832
    832
  • Thumbnail: Page 
833
    833
  • Thumbnail: Page 
834
    834
  • Thumbnail: Page 
835
    835
  • Thumbnail: Page 
836
    836
  • Thumbnail: Page 
837
    837
  • Thumbnail: Page 
838
    838
  • Thumbnail: Page 
839
    839
  • Thumbnail: Page 
840
    840
  • Thumbnail: Page 
841
    841
  • Thumbnail: Page 
842
    842
  • Thumbnail: Page 
843
    843
  • Thumbnail: Page 
844
    844
  • Thumbnail: Page 
845
    845
  • Thumbnail: Page 
846
    846
  • Thumbnail: Page 
847
    847
  • Thumbnail: Page 
848
    848
  • Thumbnail: Page 
849
    849
  • Thumbnail: Page 
850
    850