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Knowledge-Based Hierarchies: Using Organizations to Understand the Economy

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  • Luis Garicano

    (Department of Economics and Woodrow Wilson School, Princeton University, Princeton, New Jersey 08544-1021)

  • Esteban Rossi-Hansberg

    (Department of Economics and Woodrow Wilson School, Princeton University, Princeton, New Jersey 08544-1021)

Abstract

Incorporating the decision of how to organize the acquisition, use, and communication of knowledge into economic models is essential to understand a wide variety of economic phenomena. We survey the literature that has used knowledge-based hierarchies to study issues such as the evolution of wage inequality, the growth and productivity of firms, economic development, and the gains from international trade, as well as offshoring and the formation of international production teams. We also review the nascent empirical literature that has, so far, confirmed the importance of organizational decisions and many of their more salient implications.

Suggested Citation

  • Luis Garicano & Esteban Rossi-Hansberg, 2015. "Knowledge-Based Hierarchies: Using Organizations to Understand the Economy," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 1-30, August.
    • Handle: RePEc:anr:reveco:v:7:y:2015:p:1-30
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-080614-115748
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    More about this item

    Keywords

    firms; inequality; skill premium; span of control; wages;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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