The Return to Knowledge Hierarchies

Thomas N. Hubbard and Luis Garicano

No 6077, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Hierarchies allow individuals to leverage their knowledge through others' time. This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality. To quantify this effect, we analyze the earnings and organization of U.S. lawyers and use the equilibrium model of knowledge hierarchies in Garicano and Rossi-Hansberg (2006) to assess how much lawyers' productivity and the distribution of earnings across lawyers reflects lawyers' ability to organize problem-solving hierarchically. We analyze earnings, organizational, and assignment patterns and show that they are generally consistent with the main predictions of the model. We then use these data to estimate the model. Our estimates imply that hierarchical production leads to at least a 30% increase in production in this industry, relative to a situation where lawyers within the same office do not

Keywords: Hedonics; Hierarchy; Matching; Scale of operations effects; Sorting; Structural estimation (search for similar items in EconPapers)
JEL-codes: D31 J31 J41 L22 L23 L84 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: The Returns to Knowledge Hierarchies (2016)
Working Paper: The returns to knowledge hierarchies (2016)
Working Paper: The Return to Knowledge Hierarchies (2007)
Working Paper: The Return to Knowledge Hierarchies (2007)
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