Value of Managers in the Internal and External Labor Market: Evidence from an Insurance Firm in India (Presented at Society of Labor Economics Conference, Toronto, May 2018)
Abstract: Do good managers improve the productivity of workers within the firm or are they better at spotting talent from the external labor market? In an Indian-insurance firm, I find that a new recruit chosen by a manager with high team productivity outperforms the new recruit chosen by a manager with low team productivity. This variation could stem from a good manager’s skill of recruiting talent or it could be her value addition to agent performance. To find manager value addition (MVA), I use the firm’s internal labor market policy under which agents move across managers. Though, there exists substantial variation in MVA, managers of high productivity teams do not have high value addition. This indicates that when an agent moves to a high productivity team, change in his performance is not attributable to the manager of the high productivity team. Thus, a manager increases team productivity by recruiting more productive
workers from the external labor market. To the best of my knowledge, this is the first paper to complement a manager’s role in selecting good workers from external labor market against her contribution to an individual worker in the internal labor market of the firm.
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