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Flattening Firms and Wage Distribution

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  • Xin Jin

    () (Department of Economics, University of South Florida)

Abstract

This article studies the consequences of firm delayering on wages and the wage distribution inside firms. I consider a job-assignment model with asymmetric information and a slot constraint. The model predicts that more efficient firms are not necessarily larger than less efficient firms if firms are allowed to adjust their internal organizational structure through delayering. After delayering, wages at all levels increase and the wage distribution becomes more unequal. These predictions match a set of empirical findings in recent studies that are not well explained by existing theories.

Suggested Citation

  • Xin Jin, 2014. "Flattening Firms and Wage Distribution," Working Papers 0414, University of South Florida, Department of Economics.
  • Handle: RePEc:usf:wpaper:0414
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    File URL: http://economics.usf.edu/PDF/Delayering-JIN20140907.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Delayering; asymmetric information; wage distribution; slot constraint;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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