Theory-Experimental Seminar

Asier Mariscal

Universidad Carlos III


Seminar 1 – 14:30


The last 30 years in the US have seen: i-A rise in inequality with falling wages for the less skilled workers, ii-A notable decline in the price of Information Technology (IT) capital, and, iii-A reduction in the labor share (LS) of national income. I study a model with capital, labor and knowledge choices by firms organized as hierarchies. There are four key results. First, IT capital increases the CEO span of control, and an IT price reduction reallocates knowledge away from the plant and towards managerial layers. Second, the theory is consistent with capital-labor complementarity, for each skilled and unskilled labor, as in the data; In spite of it, the calibrated model features long-run IT capital plant-labor substitution as a consequence of optimal reorganization choices. Third, organizational knowledge and IT capital are complementary choices, and increase firms’ measured TFP, as in the empirical literature. Fourth, to understand recent macro trends, I perform two counterfactuals. A decrease in the demand elasticity is required for value added concentration in large firms and the decline of the aggregate labor share. On the other hand, the decline in the IT price explains the decline of plant-workers’ wages and LS, and the increase of both for managers.

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