The Macroeconomics of Delegated Management

We are interested in the macroeconomic implications of the separation of ownership andcontrol. An alternative decentralized interpretation of the stochastic growth model isproposed, one where shareholders hire a self-interested manager who is in charge of thefirm's hiring and investment decisions. Delegation is seen to give rise to a generic conflict ofinterests between shareholders and managers. This conflict fundamentally results from thedifferent income base of the two types of agents, once aggregate market clearing conditionsare taken into account...