Hannes Malmberg, University of Minnesota. "The Missing Middle Managers: Labor Costs, Firm Structure, and Development"
Department seminar. Hannes Malmberg is an Assistant Professor at the University of Minnesota, Department of Economics. He will present the paper: The Missing Middle Managers: Labor Costs, Firm Structure, and Development (joint with Jonas Hjort and Todd Schoellman).
This paper argues that high-quality middle management is scarce and expensive in poor countries and that this cost deters the adoption and spread of large, multi-establishment business enterprises. We provide new empirical evidence using a database covering compensation for more than 300,000 middle managers who work for leading business enterprises around the world. Our main finding is that PPP-adjusted compensation for these workers does not vary much with devel- opment. We quantify the importance of this finding using an appropriate technology framework in which firms choose the scale and organization of production, which we calibrate to the US history of adopting managerial enterprises. We find that lowering the wage of middle management in poor countries would increase aggregate output by 40 percent, and the employment share of managerial enterprises from 18 percent to 40 percent of the labor force.