Author(s)
Luis Garicano and Esteban Rossi-Hansberg
Source
Journal of the European Economic Association - Papers and Proceedings, 2006
Summary
This paper looks at the demand for managers in the knowledge economy.
Policy Relevance
Communications technology can affect the demand for high-skill workers such as managers.
Main Points
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Our theory is that changes in communications technology such as the growth of railways and telegraphy lets high and low skill individuals form teams.
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At first this increases the demand for high-skill workers, who manage low-skill production workers.
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But if communications technology improves further, fewer managers are needed because a single manager can handle more tasks. The demand for high-skill workers falls.
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As the nineteenth century ended and the twentieth century began, some data shows support for this theory in wage patterns of low and high-skill workers.