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  3. American Economic Journal: Microeconomics
  4. November 2017
  5. Management Quality and Firm Hierarchy in Industry Equilibrium

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Management Quality and Firm Hierarchy in Industry Equilibrium

  • Cheng Chen
American Economic Journal: Microeconomics
vol. 9, no. 4, November 2017
(pp. 203–44)
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Abstract

I incorporate a monitoring-based firm hierarchy into an industry equilibrium model with heterogeneous firms. I then use the theory to study aggregate impacts of an economy-wide improvement in monitoring efficiency. This shock generates a selection effect, which favors more hierarchical (i.e., more layers) firms. Interestingly, these implications depend on firms' heterogeneous choices about their hierarchy and completely disappear when firms are homogeneous in terms of the number of layers inside the hierarchy.

Citation

Chen, Cheng. 2017. "Management Quality and Firm Hierarchy in Industry Equilibrium." American Economic Journal: Microeconomics, 9 (4): 203–44. DOI: 10.1257/mic.20160305

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • L23 Organization of Production
  • L25 Firm Performance: Size, Diversification, and Scope
  • M12 Personnel Management; Executives; Executive Compensation
  • M54 Personnel Economics: Labor Management
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