Occupational choice with endogenous spillovers

We study a model that integrates productive and socializing efforts with occupational choice, and endogenous spillovers. We show that more talented individuals work harder and contribute more to externalities, but also have incentives to segregate. Average socializing increases in the productivity of the occupation. The size of an occupation grows with its synergies. Individuals under‐invest in productive and socializing effort, and sort themselves inefficiently into occupations. We derive the optimal subsidy for sorting into different occupations. Finally, we derive a rule to identify overpopulated sectors and establish the connection between inequality of talents, socializing, productive efforts and occupation size.