Knowledge-based Hierarchies: Using Organizations to Understand the Economy
We argue that incorporating the decision of how to organize the acquisition, use, and communication of knowledge into economic models is essential to understand a wide variety of economic phenomena. We survey the literature that has used knowledge-based hierarchies to study issues like the evolution of wage inequality, the growth and productivity of firms, economic development, the gains from international trade, as well as offshoring and the formation of international production teams, among many others. We also review the nascent empirical literature that has, so far, confirmed the importance of organizational decisions and many of its more salient implications.
Prepared for the Annual Review of Economics. We thank Pol Antràs, Lorenzo Caliendo, Ferdinando Monte, Bob Lucas, and Steve Redding for useful comments. Ricardo Reyes-Heroles provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
I have received honoraria or compensation in 2012 over $5000 from LIberbank (Board Membership) and the Toulouse Network in Information Technology (funded by Microsoft).
Luis Garicano & Esteban Rossi-Hansberg, 2015. "Knowledge-Based Hierarchies: Using Organizations to Understand the Economy," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 1-30, 08. citation courtesy of