Flattening Firms and Wage Distribution☆

Xin Jin

A chapter in Transitions through the Labor Market, 2018, vol. 46, pp 107-126 from Emerald Group Publishing Limited

Abstract: This chapter studies the consequences of firm delayering on wages and the wage distribution inside firms. I consider a market-based tournament model with asymmetric information to endogenize firms’ delayering decisions. My model predicts that when the CEO becomes more productive, firms grow in size. When the CEO becomes sufficiently productive, firms delayer. After delayering, wages at all levels rise and the wage gap between the CEO and the laborers widens. These predictions capture the dynamic process of firms’ structure and size changes and match a set of empirical findings in recent studies that are not well explained by existing theories.

Keywords: Delayering; wage inequality; technology change; tournament; slot constraint; asymmetric information; J31; M51 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rleczz:s0147-912120180000046004

DOI: 10.1108/S0147-912120180000046004

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