We propose a theory that emphasizes the role of managers for the production and allocation of human capital in firms. Managers invest time to train junior employees, and acquire information about the juniors' abilities that is valuable for job assignments. This dual role of managers matters...

Managers ("bosses") are central to the development and allocation of human capital in firms ("talent management") because they both train junior employees and acquire private information about the juniors' abilities. While a multi-divisional firm would want to allocate workers to jobs wherever...

I examine optimal incentives and performance measurement in a model where an agent has specific knowledge (in the sense of Jensen and Meckling) about the consequences of his actions for the principal. Contracts can be based both on "input" measures related to the agent's actions, and an "output"...

This paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers. A central assumption is that there is free entry and exit in the industry, which implies that changes in the nature of competition lead to changes in...