NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bureaucracy as a Mechanism to Generate Information

Walter Novaes, Luigi Zingales

NBER Working Paper No. 9763
Issued in June 2003
NBER Program(s):   CF

Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled bureaucratic' and inefficient. This paper argues that the thin line between efficient management practices and inefficient bureaucracy is crossed to curb managerial agency costs in a multi-layer hierarchy. The model predicts that bureaucracy increases with the frequency of managerial turnover, and it establishes a link between bureaucracy, incentive schemes, and leverage in a cross-section of firms.

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Document Object Identifier (DOI): 10.3386/w9763

Published: Novaes, Walter and Luigi Zingales. "Bureaucracy as a Mechanism to Generate Information." RAND Journal of Economics 35, 2 (Summer 2004): 245-59.

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