Distortions, endogenous managerial skills and productivity differences

Dhritiman Bhattacharya, Nezih Guner, Gustavo Ventura

Research output: Contribution to journalArticlepeer-review

38 Scopus citations


We develop a span-of-control model where managerial skills are endogenous and the outcome of investments over the life cycle of managers. We calibrate this model to U.S. plant-size data to quantify the effects of distortions that are correlated with the size of production units, and how these effects are amplified by managerial investments. We find a quantitatively important role for managerial investments. Distortions that consist of a tax rate of 20% on the top 50% managers reduce steady-state output by about 14.6% in our benchmark model. When skills are exogenous the reduction is about 9.2%.

Original languageEnglish (US)
Pages (from-to)11-25
Number of pages15
JournalReview of Economic Dynamics
Issue number1
StatePublished - Jan 2013


  • Distortions
  • Productivity differences
  • Size
  • Skill investments

ASJC Scopus subject areas

  • Economics and Econometrics


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