Managers and Productivity Differences

Nezih Guner, Andrii Parkhomenko and Gustavo Ventura ()
Additional contact information
Gustavo Ventura: Arizona State University

No 9586, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We parameterize this model with U.S. observations on managerial earnings, the size-distribution of plants and macroeconomic aggregates. We then quantify the relative importance of exogenous productivity differences, and the size-dependent distortions emphasized in the misallocation literature. Our findings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions. Distortions that halve the growth of relative managerial earnings (a move from the U.S. to Italy in our data), lead to a reduction in managerial quality of 27% and to a reduction in output of about 7% – more than half of the observed gap between the U.S. and Italy. We find that cross-country variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.

Keywords: skill investments; size; distortions; management practices; managers; productivity differences (search for similar items in EconPapers)
JEL-codes: E23 E24 J24 M11 O43 O47 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2015-12
New Economics Papers: this item is included in nep-dge, nep-eff, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Published - published in: Review of Economic Dynamics, 2018, 29, 256-282.

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Related works:
Journal Article: Managers and Productivity Differences (2018)
Working Paper: Managers and Productivity Differences (2017)
Working Paper: Managers and Productivity Differences (2016)
Working Paper: Managers and Productivity Differences (2015)
Working Paper: Managers and Productivity Differences (2015)
Working Paper: Managers and Productivity Differences (2015)
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