Distortions, Endogenous Managerial Skills and Productivity Differences

Dhritman Bhattacharya, Nezih Guner and Gustavo Ventura
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Dhritman Bhattacharya: Promontory Financial Group

Review of Economic Dynamics, 2013, vol. 16, issue 1, 11-25

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%. (Copyright: Elsevier)

Keywords: Distortions; Size; Skill investments; Productivity differences (search for similar items in EconPapers)
JEL-codes: E23 O40 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (69)

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DOI: 10.1010/j.red.2012.10.001

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