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Delay Cost, Knowledge Hierarchy, and Wages

Author

Listed:
  • Cheng Chen

    (University of Hong Kong)

  • Wing Suen

    (University of Hong Kong)

Abstract
We provide a new approach to study optimal design of knowl- edge hierarchies under general assumptions. When problem-solving be- comes more urgent, employees at each level solve more complex problems and earn more. The organization structure becomes flatter, with fewer lay- ers but a larger span of control at each layer. Moreover, knowledge ac- quisition is disproportionately concentrated among lower level employees, which results in shrinking intra-firm wage differentials across layers. We find that labor productivity of the firm increases after delay becomes more costly, despite the direct output loss due to greater delay. Using Colom- bia plant-level data, we find that exporting firms—which face higher delay cost—have fewer layers, larger span of control, and pay higher wages at all levels.

Suggested Citation

  • Cheng Chen & Wing Suen, "undated". "Delay Cost, Knowledge Hierarchy, and Wages," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-279, Boston University - Department of Economics.
    • Handle: RePEc:bos:iedwpr:dp-279
    as

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    File URL: http://www.bu.edu/econ/files/2016/04/Cheng-Delay_Layer.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    knowledge complementarity; delay and exporting; organization design; firm productivity; export-wage premium;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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