Why Should the Boss Own the Assets?

In the context of an employment relationship, I present an argument suggesting that it is more efficient for the boss to own the productive assets. The idea is that a conflict between productivity and depreciation is internalized if the player deciding what an asset is used for also has residual claims. An empirical test finds evidence consistent with this. By asking whether the boss should own the assets, the paper reverses the reasoning from the literature in which it is argued that the owner has power and thus is the boss. Copyright (c) 2002 Massachusetts Institute of Technology.