We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's...

This paper considers the effects of an interim performance evaluation on the decision of a principal to delegate authority to a potentially biased but better informed agent. Assuming the agents’ outside option to be determined by market beliefs about their type, interim evaluations (a) provide...

We develop a model of manager-employee relationships where employees care more for their manager when they are more convinced that their manager cares for them. Managers can signal their altruistic feelings towards their employees in two ways: by offering a generous wage and by giving attention....

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate a manager’s attention with higher effort. To this end we develop a common agency model with two-sided moral hazard. We show that when effort is...

This paper examines the long-run impact of ordinal rank during primary school on productivity using comprehensive English administrative data. Identification is obtained from variation in test score distributions across cohorts and subjects, such that the same score relative to the class mean...

We investigate the role of workers’ and managerial experience as a determinant of firm innovation and productivity in a sample of Italian manufacturing firms. A high share of temporary – thus un-experienced - workers is associated to low innovation and productivity. The effect of managerial...

Financial constraints are an important impediment to the growth of small businesses. We study theoretically and empirically how the financial constraints of agents affect their decisions to exert effort, and, hence the organizational decisions and growth of principals, in the context of...

Government or company decisions on whom to hire are mostly delegated to politicians, public sector officials or human resources and procurement managers. Due to anti-corruption laws, agents cannot sell contracts or positions that they are delegated to decide upon. Even if bribing is ruled out,...

Can formal contracts help resolving the holdup problem? We address this important question by studying the holdup problem in repeated transactions between a seller and a buyer in which the seller can make relation-specific investments in each period. In contrast to previous findings, we...

Recently collected data show that, within any manufacturing industry, vertically integrated firms tend to have larger, higher productivity plants, account for the bulk of sales, and also sell externally most of the inputs they produce. In a weak contracting environment characteristic of...