The Optimal Use of Management

45 Pages Posted: 20 Jun 2019 Last revised: 24 Jun 2020

See all articles by Robin C. Sickles

Robin C. Sickles

Rice University - Department of Economics

Kai Sun

Shanghai University

Thomas Triebs

Loughborough University - School of Business and Economics

Date Written: June 14, 2019

Abstract

We analyze the management input from the perspective of a shadow cost minimizing firm. With the help of Bloom and Van Reenen (2007)’s management measure we estimate management’s shadow price, dual Morishima elasticities of substitution, and relative price efficiencies vis-à-vis labor and
capital. We find that the shadow price of management is about 1.3 million US dollars per survey scale point. Management is a weak complement for labor but a strong complement for capital. Increases in management reduce the relative income share of labor but not capital. Most firms use too little management relative to both labor and capital, but relative use of management improves over time, with the combination of ownership and control, and competition. Our results suggest that management behaves similar to other inputs.

Keywords: management, shadow price, elasticity of substitution, price efficiency

JEL Classification: D22, D24, M11

Suggested Citation

Sickles, Robin C. and Sun, Kai and Triebs, Thomas, The Optimal Use of Management (June 14, 2019). Available at SSRN: https://ssrn.com/abstract=3404122 or http://dx.doi.org/10.2139/ssrn.3404122

Robin C. Sickles

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

Kai Sun

Shanghai University ( email )

149 Yanchang Road
SHANGDA ROAD 99
Shanghai 200072, SHANGHAI 200444
China

Thomas Triebs (Contact Author)

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

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