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Flattening Firms and Wage Distribution☆

In: Transitions through the Labor Market

Author

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  • Xin Jin

Abstract

This chapter studies the consequences of firm delayering on wages and the wage distribution inside firms. I consider a market-based tournament model with asymmetric information to endogenize firms’ delayering decisions. My model predicts that when the CEO becomes more productive, firms grow in size. When the CEO becomes sufficiently productive, firms delayer. After delayering, wages at all levels rise and the wage gap between the CEO and the laborers widens. These predictions capture the dynamic process of firms’ structure and size changes and match a set of empirical findings in recent studies that are not well explained by existing theories.

Suggested Citation

  • Xin Jin, 2018. "Flattening Firms and Wage Distribution☆," Research in Labor Economics, in: Transitions through the Labor Market, volume 46, pages 107-126, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-912120180000046004
    DOI: 10.1108/S0147-912120180000046004
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    More about this item

    Keywords

    Delayering; wage inequality; technology change; tournament; slot constraint; asymmetric information; J31; M51;
    All these keywords.

    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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