Thomas Cooley, Ramon Marimon, and Vincenzo Quadrini's "Commitment in Organizations and the Competition for Talent," published in the Review of Economic StudiesSeptember 21, 2020
We show that a change in organizational structure from partnerships to public companies—which weakens contractual commitment—can lead to higher investment in high return-and-risk activities, higher productivity (value added per employee) and greater income dispersion (inequality). These predictions are consistent with the observed evolution of the financial sector where the switch from partnerships to public companies has been especially important in the decades that preceded the 21st Century financial crisis.
Thomas Cooley is the Paganelli-Bull Professor Emeritus of Business and International Trade at NYU Stern.
Read the full paper here.