Firm/Employee Matching: An Industry Study of American Lawyers

We study the sources of match-specific value at large American law firms by analyzing how graduates of law schools group into law firms. We measure the degree to which lawyers from certain schools concentrate within firms and then analyze how this agglomeration can be explained by “natural advantage” factors (such as geographic proximity) and by productive spillovers across graduates of a given school. We show that large law firms tend to be concentrated with regard to the law schools they hire from and that individual offices within these firms are substantially more concentrated. The degree of concentration is highly variable, as there is substantial variation in firms’ hiring strategies. There are two main drivers of variation in law school concentration within law offices. First, geography drives a large amount of concentration, as most firms hire largely from local schools. Second, we show that school-based networks (and possibly productive spillovers) are important because partners’ law schools drive associates’ law school composition even controlling for firm, school, and firm/school match characteristics and when we instrument for partners’ law schools. ∗Oyer: Stanford Graduate School of Business and NBER, [email protected]. Schaefer: David Eccles School of Business and Institute for Public and International Affairs, University of Utah, [email protected]. We thank David Autor, Scott Baker, Barry Guryan, Daniel Hamermesh, William Henderson, Matt Jackson, Geoffrey Miller, Alan Sorensen, and Betsey Stevenson for comments and discussions. We also thank participants at numerous seminars and conferences. We are grateful to Marko Tervio for sharing his economist data and to Marco Beltran, Eric Forester, Christopher Jung, Nam Kim, Davis Kingsley, Diane Lee, David Oyer, Jack Rudolph, William Vijverberg, and Kenneth Wong for research assistance. Prior versions of this paper were circulated under the title “The Personnel-Economic Geography of US Law Firms and Law Schools.”