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Organizational Hierarchies in the Slovenian Manufacturing Sector

Bonilla, Santiago and Polanec, Sašo (2020): Organizational Hierarchies in the Slovenian Manufacturing Sector. Forthcoming in:

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We study organizational hierarchies in a transition country. Using employer-employee matched data for a set of Slovenian manufacturing firms, we find strong support for the key hypotheses of the knowledge-based hierarchies proposed by Garicano (2000) and Caliendo and Rossi-Hansberg (2012). According to these theories, firms should organize in consecutively ordered layers with less hours and higher wages in higher layers. Following Caliendo, Monte, and Rossi-Hansberg (2015b), who were the first to test the predictions of knowledge-based theories of organizational hierarchies, we are able to directly compare our results to those obtained for French manufacturing firms. We find that Slovenian firms exhibit lower consistency with consecutive ordering of organizational layers, have on average fewer organizational layers and change them less frequently. We attribute lower organizational depth to the higher wage premia to workers in higher organizational layers, which is an implication of under-investment in human capital during the socialist era.

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