Abstract
We investigate how the decision of workers to join a specific type of firm affects their future career opportunities. Workers can either join a very competitive firm (big pond) or a less competitive one (small pond). In a big pond, it is more difficult to advance, but the potential rewards are higher. We determine a separating equilibrium in which only workers who are confident in their ability join big ponds, implying that the average abilities of new entrants are higher in big ponds than in small ponds. In an empirical analysis with data from professional soccer, we support all the implications from our theoretical model.
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