The returns to knowledge hierarchies

Luis Garicano and Thomas N. Hubbard

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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. This article analyzes the earnings and organization of US lawyers and uses an equilibrium model of knowledge hierarchies inspired by Garicano and Rossi-Hansberg (2006. “Organization and Inequality in a Knowledge Economy,” 121 Quarterly Journal of Economics 1383–436) to assess how much lawyers’ productivity and the distribution of earnings across lawyers reflects lawyers’ ability to organize problem-solving hierarchically. Our estimates imply that hierarchical production leads to at least a 30% increase in productivity in this industry, relative to a situation where lawyers within the same office do not “vertically specialize.” We further find that it amplifies earnings inequality, mostly by increasing the earnings of the v

JEL-codes: J50 (search for similar items in EconPapers)
Date: 2016-11-01
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Citations: View citations in EconPapers (3)

Published in Journal of Law, Economics, and Organization, 1, November, 2016, 32(4), pp. 653-684. ISSN: 8756-6222

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http://eprints.lse.ac.uk/68590/ Open access version. (application/pdf)

Related works:
Journal Article: The Returns to Knowledge Hierarchies (2016)
Working Paper: The Return to Knowledge Hierarchies (2007)
Working Paper: The Return to Knowledge Hierarchies (2007)
Working Paper: The Return to Knowledge Hierarchies (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:68590

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