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Distortions, Endogenous Managerial Skills and Productivity Differences

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  • Dhritiman Bhattacharya
  • Nezih Guner
  • Gustavo Ventura

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%.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 673.

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Date of creation: Nov 2012
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Handle: RePEc:bge:wpaper:673

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Keywords: distortions; size; skill investments; productivity differences;

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Cited by:
  1. Hsieh, Chang-Tai & Klenow, Peter J., 2012. "The Life Cycle of Plants in India and Mexico," Working Papers 12-20, Center for Economic Studies, U.S. Census Bureau.
  2. Alain Gabler & Markus Poschke, 2013. "Experimentation by Firms, Distortions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 26-38, January.

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