joint with Gustavo Ventura
Abstract: This paper documents that senior plant managers in less-developed countries spend more time dealing with government rules and regulations than their counterparts in richer countries. These facts are interpreted through the lens of a span-of-control growth model, in which top managers run heterogeneous production plants, employing middle managers as well as production workers. The model implies that increasing the time burden on top management leads to equilibrium changes in wages, occupational sorting, the size distribution of production plants and ultimately, to a reduction in aggregate output. These consequences hold even when the time burden is symmetric across all plants. Quantitative results show that increasing the burden on managers’ time from the levels observed in Denmark to the higher levels observed poorer countries have substantial consequences. Imposing the average time in Argentina reduces aggregate output by about 1/3 and mean plant size by more than 5 employees. Results contribute to rationalizing differences in plant size and output across countries via a channel hitherto unexplored in the literature.
Managers, Talent Misallocation and Productivity (December 2023 version)
Abstract: Using aggregate and plant-level data, I document that in the manufacturing sector, (i) richer countries tend to have more managers per plant, (ii) bigger plants have more middle managers, (iii) managers in bigger plants earn more on average, and (iv) plants hire more managers as they grow. I develop a model where plants hire more middle managers with higher wages to increase their span-of-control. I find that when size-dependent distortions decrease the mean plant size from the U.S. to South Korea, the output declines by 16.5% and the number of managers per plant falls by 41.1%.
Bribery, Plant Size and Size Dependent Distortions (January 2024 version, R&R at Journal of Development Economics)
Abstract: I document that small plants spend a higher fraction of their output on bribery than big plants, and that non-bribe-paying plants face higher distortions compared to bribe-paying plants. I develop a one-sector growth model in which size-dependent distortions, bribery opportunities, and different plant sizes coexist. In the model, plants are able to avoid distortions through bribery. The model parameters are calibrated with distortions and bribery opportunities in order to account for the plant size distribution as well as bribery expenditures by different plant sizes in the Turkish data. Counterfactual exercises show that size-dependent distortions become less distortionary in the presence of bribery opportunities. An increase in the size dependency of distortions has smaller aggregate effects since plants are able to circumvent distortions by paying larger bribes. Quantitatively, when bribery opportunities are present in the economy, mean plant size and output are 7.1 and 1.2 percent higher, respectively.
Fading Away Informality by Development (first version coming soon!)
Abstract: This paper documents that (i) richer countries have smaller informal, unregistered, plants in terms of employment on average and (ii) informal plants operate at lower levels of productivity than formal plants. Then, I develop a model with incomplete tax enforcement where informality can occur at the tails of the ability distribution. Hence, both agents with the lowest ability and agents with abilities slightly lower than those of formal managers exist in the informal sector. When the economy develops through improvements in aggregate technology, informal agents at the margin choose to be workers and formal managers due to higher wages and better technology, which decreases informal mean size. Quantitative results indicate that when the aggregate technology level is disciplined to account for informal mean plant size across countries, it can explain 31.6% of income per capita differences on average.
joint with Orhan Torul
The Journal of Economic Inequality, 2020, 18 (2), 239–259.
Abstract: We investigate the evolution of Turkey’s wage, income and consumption inequalities using a cross-country comparable methodology and the Turkish Statistical Institute’s Household Budget Survey and the Survey of Income and Living Conditions micro data sets. Turkey’s wage, income and consumption inequalities all exhibit downward time trends over the 2002-2016 period. This observation aligns well with the rapid minimum wage growth over the period. While wage inequality estimates display strong countercyclicality, income and consumption inequalities exhibit rather acyclical time-series movements. While recent education premium estimates of Turkey are similar to those in the early 2000s, estimates of recent gender and experience premiums, as well as residual wage inequality are lower. Income and consumption inequality estimates exhibit similar time trends with moderate level differences, and these trends are robust to the choice of inequality metrics.