Academic Commons

Reports

The Labor Market and Corporate Structure

Newman, Andrew F.; Acemoglu, Daron

We analyze the impact of labor demand and labor market regulations on the corporate structure if firms. We find that higher wages are associated with lower monitoring, irrespective of whether these high wages are caused by labor market regulations, unions or higher labor demands. These comparative static results are in line with the broad trends in the data. We also find that the organization of firms has important macroeconomic implications. In particular, monitoring is a type of rent-seeking activity and the decentralized equilibrium spends excessive resources on monitoring. Labor market regulations that reduce monitoring by pushing wages up may increase net output or reduce it only by a small amount even thought they reduce employment.

Subjects

Files

More About This Work

Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 9697-23
Published Here
March 3, 2011

Notes

June 1997

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.