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The returns to knowledge hierarchies

Garicano, Luis and Hubbard, Thomas N. (2016) The returns to knowledge hierarchies. Journal of Law, Economics, and Organization, 32 (4). pp. 653-684. ISSN 8756-6222

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Abstract

Hierarchies allow individuals to leverage their knowledge through others’ time. This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality. This article analyzes the earnings and organization of US lawyers and uses an equilibrium model of knowledge hierarchies inspired by Garicano and Rossi-Hansberg (2006. “Organization and Inequality in a Knowledge Economy,” 121 Quarterly Journal of Economics 1383–436) to assess how much lawyers’ productivity and the distribution of earnings across lawyers reflects lawyers’ ability to organize problem-solving hierarchically. Our estimates imply that hierarchical production leads to at least a 30% increase in productivity in this industry, relative to a situation where lawyers within the same office do not “vertically specialize.” We further find that it amplifies earnings inequality, mostly by increasing the earnings of the v

Item Type: Article
Official URL: http://jleo.oxfordjournals.org/
Additional Information: © 2016 The Authors
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
K Law > K Law (General)
Sets: Departments > Management
Date Deposited: 12 Dec 2016 10:01
URL: http://eprints.lse.ac.uk/68590/

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