Incentives and Loss of Control in an Optimal Hierarchy
This paper studies incentives and loss of control in a hierarchy model which combines and generalizes the models of Williamson, Calvo-Wellisz and Keren-Levhari. In our model of the hierarchy, the levels of effort from managers and workers, the wage scales, the span of control and, in particular, the total number of tiers are all endogenous. Using optimal control techniques, we show that in the optimal hierarchy the wage scales and effort levels decrease as one moves down the hierarchy. As the hierarchy expands with no technological progress, workers exert less effort and are paid less, top managers work harder and are paid more and the wage distribution becomes increasingly skewed.
Volume (Year): 61 (1994)
Issue (Month): 3 ()
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:61:y:1994:i:3:p:527-544.. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.