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CEP occasional paper

Knowledge-based Hierarchies: Using Organizations to Understand the Economy


We argue that incorporating the decision of how to organize the acquisition, use, and communication of knowledge into economic models is essential to understand a wide variety of economic phenomena. We survey the literature that has used knowledge-based hierarchies to study issues like the evolution of wage inequality, the growth and productivity of firms, economic development, the gains from international trade, as well as offshoring and the formation of international production teams, among many others. We also review the nascent empirical literature that has, so far, confirmed the importance of organizational decisions and many of its more salient implications.


Luis Garicano and Esteban Rossi-Hansberg

16 October 2014     Paper Number CEPOP43

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This CEP occasional paper is published under the centre's Growth programme.