Economic Development According to Chandler
Abstract:
Business historian Alfred C handler showed that firms in the Second Industrial Revolution had to adopt managerial capitalism to benefit fully from new technologies that leveraged economies of scale or scope and raised productivity. We show that the same forces are relevant for understanding economic development today. Large fi rms around the world use white-collar labor more intensively. Developing co untries have low shares of white-collar workers, accounted for entirely by low skill levels. Motivated by these facts, we develop a multi-sector gener al equilibrium model of the link between skills and the adoption of manager ial capitalism. The model extends the occupational choice model of Lucas (1 978) by allowing entrepreneurs to decide the share of administrative tasks performed by hired professionals. Professionalizing a higher share of tasks brings the firm closer to constant returns to scale and leads to larger fi rm size. We calibrate the model to replicate joint patterns of education, f irm size, sectoral choices, and occupational choices in the average middle- income country. Our counterfactuals show that growth in the supply of skill s can help explain the adoption of managerial capitalism, whereas structura l transformation by itself cannot.
DTSTAMP:20260423T043842Z DTSTART:20241007T163000Z DTEND:20241007T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR