The Law of One Price and a Theory of the Firm

Shailendra Raj Mehta

RAND Journal of Economics, 1998, vol. 29, issue 1, 137-156

Abstract: I use a hierarchical perspective to explain the pattern of interindustry wages and capital intensities. Industries that have more productive technologies pay more than less-productive ones, and are more capital intensive as well. Results on size of the hierarchy, effort levels, and span of control are presented as well. The key insight is that supervisors both monitor and coordinate their subordinates, and time spent on one of these activities reduces the time available for the other. Several stylized facts are explained thereby.

Date: 1998
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