Management Quality and Firm Hierarchy in Industry Equilibrium

Cheng Chen

American Economic Journal: Microeconomics, 2017, vol. 9, issue 4, 203-44

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.

JEL-codes: D21 L23 L25 M12 M54 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mic.20160305
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Citations: View citations in EconPapers (20)

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