The Shrinking of Middle Management
26 Pages Posted: 12 Nov 2009
Date Written: October 21, 2008
Abstract
We analyse a model in which (1) managers require experience in order to be productive; (2) providing managers with experience is costly and noncontractible. We demonstrate that if there is an increase in the mobility of managers, there may be a free-riding problem, in that each firm has too little incentive to give managers experience. Surprisingly, welfare may be higher in the state of the world with more mobility. We explore individual managers’ incentives to invest in generalizing their skills to improve their mobility.
Keywords: General skills, experience, mobility, wage bargaining, managers
JEL Classification: L20, J24, J60
Suggested Citation: Suggested Citation
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