Distortions, Endogenous Managerial Skills and Productivity Differences

Dhritiman Bhattacharya (), Nezih Guner () and Gustavo Jaime Ventura
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Dhritiman Bhattacharya: EQUIFAX

No 5963, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We develop a span-of-control model where managerial skills are endogenous and the outcome of investments over the life cycle of managers. We calibrate this model to U.S plant-size data to quantify the effects of distortions that are correlated with the size of production units. These distortions lead to sharp reductions in plant productivity and the fraction of employment in large plants, with a quantitatively important role for managerial investments. We find that the model can account quite well for properties of Japanese size-distribution data, with a model-implied TFP of about 83% of the U.S. Distortions are critical in accounting for the differences in size distribution between the U.S. and Japan.

Keywords: distortions; size; skill investments; productivity differences (search for similar items in EconPapers)
JEL-codes: O40 E23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-eff and nep-lab
Date: 2011-09
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Related works:
Journal Article: Distortions, Endogenous Managerial Skills and Productivity Differences (2013)
Working Paper: Distortions, Endogenous Managerial Skills and Productivity Differences (2012)
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