Abstract
We develop a span-of-control model where managerial skills are endogenous and the outcome of investments over the life cycle of managers. We calibrate this model to U.S. plant-size data to quantify the effects of distortions that are correlated with the size of production units, and how these effects are amplified by managerial investments. We find a quantitatively important role for managerial investments. Distortions that consist of a tax rate of 20% on the top 50% managers reduce steady-state output by about 14.6% in our benchmark model. When skills are exogenous the reduction is about 9.2%.
Original language | English (US) |
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Pages (from-to) | 11-25 |
Number of pages | 15 |
Journal | Review of Economic Dynamics |
Volume | 16 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1 2013 |
Keywords
- Distortions
- Productivity differences
- Size
- Skill investments
ASJC Scopus subject areas
- Economics and Econometrics