Hierarchical Organization and Inequality in anEconomy with an Implicit Market for Productive Time

This paper proposes an equilibrium theory of the organization of work in an economy with animplicit market for productive time. In this economy, agents have limited productive time andcan choose to produce in autarky, buy productive time from helpers to increase ownproduction or, sell their productive time to a leader and thereby give up own production. Thisimplicit market gives rise to the formation of teams, organized in hierarchies with one leaderat the top and helpers below. We show that relative to autarky, hierarchical organizationleads to higher within and between team payoffs/productivity inequality. We investigate thislink empirically in the context of road cycling. We show that the rise in performance inequalityin the peloton since the 1970s is merely due to a rise in within team performance inequalityand consistent with a change in the hierarchical organization of teams and an increase in thehelping intensity within team....