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The Return to Knowledge Hierarchies

Luis Garicano () and Thomas Hubbard

No 6077, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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
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Citations: View citations in EconPapers (14) Track citations by RSS feed

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