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The Missing Middle Managers: Labor Costs, Firm Structure, and Development

Author

Listed:
  • Jonas Hjort
  • Hannes Malmberg
  • Todd Schoellman

Abstract

This paper shows that large, multi-establishment business enterprises face a high cost of middle management in poor countries and that this cost inhibits the growth of the modern sector. We provide new empirical evidence using a database covering compensation for 300,000 middle managers working at modern firms in 146 countries. We estimate that the elasticity of real management costs with respect to real GDP per worker is 0.1. We quantify the importance of this finding using a calibrated appropriate technology model where firms choose whether to adopt the management-intensive modern business structure. Lower management costs in developing countries would increase the revenue share of the modern sector by 10-20 percentage points

Suggested Citation

  • Jonas Hjort & Hannes Malmberg & Todd Schoellman, 2022. "The Missing Middle Managers: Labor Costs, Firm Structure, and Development," NBER Working Papers 30592, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30592
    Note: DEV EFG LS PR
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    Cited by:

    1. Virginia Minni, 2024. "Global managers, local workers: Wage setting inside a multinational firm," CEP Discussion Papers dp1975, Centre for Economic Performance, LSE.

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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