Worker Allocation, Hierarchies and the Wage Distribution

Economists have traditionally viewed the allocation of workers among jobs through the concept of comparative advantage. This paper investigates hierarchical production models which display an absence of comparative advantage, in order to demonstrate that for hierarchical production there is a second allocating factor which plays an important role. Two results are found. First, the allocation of workers among jobs tends to match high ability workers with positions which value ability highly. Second, despite the fact that the models display an absence of comparative advantage, i.e. the standard theoretical explanation for why wage distributions might be skewed, the models' wage distributions are skewed to the right relative to the underlying ability distributions.