Task Discretion, Labor-market Frictions, and Entrepreneurship

Abstract An agent can perform a job in several ways, which we call tasks. Choosing agents’ tasks is the prerogative of management within firms, and agents themselves if they are entrepreneurs. While comparative advantage at different unknown, it be learned by observing their performance. However, that generate more information could lead to lower short-term profits. Hence, firms will allocate workers informative only cannot easily move other firms. When, instead, may prefer become entrepreneurs acquire task discretion, even payoff than employees. Our model generates novel predictions with respect to, for example, how wage dynamics who switch between entrepreneurship employment affected labor contracting frictions. (JEL D83, J24, J62, J63, L26, M13).