I incorporate a monitoring-based firm hierarchy into an industry equilibrium model with heterogeneous firms. I then use the theory to study aggregate impacts of an economy-wide improvement in monitoring efficiency. This shock generates a selection effect, which favors more hierarchical (i.e., more layers) firms. Interestingly, these implications depend on firms' heterogeneous choices about their hierarchy and completely disappear when firms are homogeneous in terms of the number of layers inside the hierarchy.
"Management Quality and Firm Hierarchy in Industry Equilibrium."
American Economic Journal: Microeconomics,
Firm Behavior: Theory
Organization of Production
Firm Performance: Size, Diversification, and Scope
Personnel Management; Executives; Executive Compensation
Personnel Economics: Labor Management