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DOES DELEGATION INCREASE WORKER TRAINING?
Author(s) -
Bilanakos Christos,
Heywood John S.,
Sessions John G.,
Theodoropoulos Nikolaos
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12515
Subject(s) - delegation , principal (computer security) , instrumental variable , investment (military) , profit (economics) , economics , business , training (meteorology) , microeconomics , labour economics , econometrics , management , computer science , computer security , physics , politics , meteorology , political science , law
We model a principal‐firm offering training to its agent‐worker under two alternative organizational structures: integration , where the principal retains authority to overrule the investment project recommended by the worker; and delegation , where the principal cannot overrule the worker's preferred investment project. We assume that training reduces the worker's effort cost of assembling information about alternative projects' payoffs and identify the conditions under which delegation increases the profit‐maximizing intensity of training. Empirical estimates from matched employer–employee data show that workplaces delegating authority do provide more worker training. This result persists in two cross sections, in panel fixed‐effect estimates and, critically, in an instrumental variable exercise that also controls for establishment fixed effects. ( JEL D21, D22, D23, M53, M54)