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Managerial Delegation and Wage Inequality

Author

Listed:
  • Jiancai Pi

    (Department of Economics, Nanjing University)

  • Shuning Li

    (Department of Economics, Nanjing University)

Abstract

This paper analyzes how managerial delegation affects skilled-unskilled wage inequality. In the basic model with full employment, we find that an increase (resp., a decrease) in the strength of the profit incentive in managerial del- egation will decrease (resp., increase) skilled-unskilled wage inequality. In the extended model with unemployment, we find that a stronger strength of the profit incentive in managerial delegation will narrow down (resp., widen) skilled-unskilled wage inequality if the substitution elasticity between unskilled labor and capital is small enough (resp., sufficiently large). Our conclusions also hold under different risk aversion utility functions.

Suggested Citation

  • Jiancai Pi & Shuning Li, 2022. "Managerial Delegation and Wage Inequality," Annals of Economics and Finance, Society for AEF, vol. 23(1), pages 141-157, May.
    • Handle: RePEc:cuf:journl:y:2022:v:23:i:1:pili
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    References listed on IDEAS

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    More about this item

    Keywords

    Managerial delegation; Skilled-unskilled wage inequality; General equilibrium approach;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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