The hierarchical structure of the firm: a geometric perspective

Kam Ki Tang and Leo Yanes

Prague Economic Papers, 2009, vol. 2009, issue 2, 156-175

Abstract: This paper incorporates hierarchical structure into the neoclassical theory of the firm. Firms are hierarchical in two respects: the organization of workers in production and the wage structure. The firm's hierarchy is represented as a sector of a circle, where the radius represents the hierarchy's height, the width of the sector represents the breadth of the hierarchy at a given height, and the angle of the sector represents the span of control. A perfectly competitive firm chooses height and width, as well as capital, in order to maximize profit. We analyse the short-run and long-run impact of changes in scale economies, input substitutability, and input and output prices on the firm's hierarchical structure. We find that the firm grows as the specialization of its workers increases or as its output price increases relative to input prices. The effect of changes in scale economies is contingent on the price of output. The model also brings forth an analysis of wage inequality within the firm, which is found to be independent of the firm's hierarchical organization of workers, and only depends on the firm's wage schedule.

Keywords: inequality; theory of the firm; hierarchical structure; economies of scale; input substitutability (search for similar items in EconPapers)
JEL-codes: D63 L22 L23 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://pep.vse.cz/doi/10.18267/j.pep.347.html (text/html)
http://pep.vse.cz/doi/10.18267/j.pep.347.pdf (application/pdf)
free of charge

Related works:
Working Paper: The Hierarchical Structure of the Firm: A Geometric Perspective (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:prg:jnlpep:v:2009:y:2009:i:2:id:347:p:156-175

Ordering information: This journal article can be ordered from
Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
http://pep.vse.cz

DOI: 10.18267/j.pep.347

Access Statistics for this article

Prague Economic Papers is currently edited by Klára Pavlová

More articles in Prague Economic Papers from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().