INDUSTRY DYNAMICS AND AGENCY

This thesis empirically investigates the effects of agency problemson endogenous managerial effort, firm performance, corporatestructure and industry-wide productivity.In the second chapter, I develop an industrial evolution model withendogenous managerial effort and endogenous organizational form. Themodel has heterogeneous firms competing in a monopolisticallycompetitive market, endogenous entry and exit and aggregateuncertainty. It also characterizes the relationship between amanager and an owner by a long term dynamic contract. The structuralmodel allows me to quantify the changes in managerial behavior anddistribution of firms' organizational form and, as a result, thechange in aggregate productivity in response to heightenedcompetitive pressure.In chapter three, I estimate the model with exogenous corporatestructure. Two versions of the model are considered to be able todemonstrate the differences in managerial responses when theorganizational forms are different. The first one is the model whereownership is separated from management, the second is the one inwhich managers own their firms. The model is estimated using paneldata on the Colombian Malt industry. With the estimated parameters,counterfactual experiments are conducted to quantify the importanceof agency on endogenous effort and firm performanceThe final chapter considers the model described in the first essaywith endogenous set of corporate structure. The model is simulatedwith a plausible set of parameters that generate both corporationsand family owned firms in steady state equilibrium. The simulatedmodel is used to show that competitive pressures significantlyaffects the organizational choice of owners. Heightened competitivepressure induce firms to choose proprietorships over corporations.