Endogenous task allocation and intrafirm bargaining

We develop a model that incorporates task-based production into a matching model with intrafirm wage bargaining. Unlike in existing task-based models, the representative firm derives the optimal task allocation as a function of capital and labor, rather than relative factor prices. Embedding this mechanism in a model with strategic employment choice, we show how the properties of task-level technology affect the extent of overhiring. • We integrate task-based production into a matching model with intrafirm bargaining. • Firms choose employment and task allocation based on factor inputs before bargaining. • The setup differs from many task-based models where input prices are taken as given. • Allowing for strategic employment choice, endogenous task allocation reduces overhiring. • Overhiring additionally depends on task-level technology.