Polarization, Purpose and Profit

We present a model in which firms compete for workers who value nonpecuniary job attributes, such as purpose, sustainability, political stances, or working conditions. Firms adopt production technologies that enable them to offer jobs with varying levels of these desirable attributes. In a competitive assignment equilibrium, firms become polarized, catering to workers with extreme preferences. Firms not only reflect but also amplify the polarized preferences of the general population. Firm polarization is positively related to industry concentration. More polarized sectors exhibit higher profits, lower average wages, and a reduced labor share of value added. Sustainable investing amplifies firm polarization.

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