The return to knowledge hierarchies
By: Luis Garicano, Thomas N. Hubbard.
Contributors: Hubbard, Thomas N.; Garicano, Luis.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 12815; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12815.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Hierarchies allow individuals to leverage their knowledge through others' time.  This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality.  To quantify this effect, we analyze the earnings and organization of U.S.  lawyers and use the equilibrium model of knowledge hierarchies in Garicano and Rossi-Hansberg (2006) to assess how much lawyers' productivity and the distribution of earnings across lawyers reflects lawyers' ability to organize problem-solving hierarchically.  We analyze earnings, organizational, and assignment patterns and show that they are generally consistent with the main predictions of the model.  We then use these data to estimate the model.  Our estimates imply that hierarchical production leads to at least a 30% increase in production 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, increasing the ratio between the 95th and 50th percentiles from 3.7 to 4.8.  We conclude that the impact of hierarchy on productivity and earnings distributions in this industry is substantial but not dramatic, reflecting the fact that the problems lawyers face are diverse and that the solutions tend to be customized"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/22/2007.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.