Abstract
Country-specific and industry-specific human capital are potentially important factors in the market for talent. In a competitive matching model, we analyze how the distribution and composition of human capital affects how the top firms and managers from one market compete with those from another, to develop an integrated market for talent. When talent has general and market-specific human capital (GHC and M-SHC) components, the matching problem becomes more complex. We derive the unique integrated market equilibrium to show how talent 'migration' (or cross-market hiring) may increase or decrease overall average productivity, compensation, and shareholder value -- compared to a constrained value-maximizing benchmark, the market equilibrium leads to 'too much' cross-market hiring. We also identify circumstances where i) no migration will occur, despite the absence of any other barrier to integration; ii) a 'brain drain' occurs, despite the migrating managers creating less value in the destination market than at home; and iii) migration is non-monotonic in M-SHC.
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