Discussion Paper Details

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Title: Bureaucracy as a Mechanism to Generate Information

Author(s): Walter Novaes and Luigi Zingales

Publication Date: June 2003

Keyword(s): bureaucracy, organizations and turnover

Programme Area(s): Industrial Organization

Abstract: Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled ?bureaucratic? and inefficient. This Paper argues that the thin line between efficient management practices and inefficient bureaucracy is crossed to curb managerial agency costs in a multi-layer hierarchy. The model predicts that bureaucracy increases with the frequency of managerial turnover, and it establishes a link between bureaucracy, incentive schemes, and leverage in a cross-section of firms.

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Bibliographic Reference

Novaes, W and Zingales, L. 2003. 'Bureaucracy as a Mechanism to Generate Information'. London, Centre for Economic Policy Research.