Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250617 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14956
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We merge firm-level data on ownership linkages with administrative data on German workers to analyze how the position in a business group hierarchy affects workers' wages. To acknowledge that ownership linkages are not onedirectional, we propose an index of hierarchical distance to the ultimate owner that accounts for the complex network structure of business groups. After controlling for unobserved heterogeneity, we find a positive effect of larger hierarchical distance to the ultimate owner of a business group on workers' wages. To explain this finding, we develop a monitoring-based theory of business groups. Our model predicts higher wages to prevent shirking by workers if a larger hierarchical distance to the ultimate owner is associated with lower monitoring efficiency.
Subjects: 
business groups
ownership networks
workers wages
difference-in-difference
hierarchical distance
JEL: 
C23
J31
L23
Document Type: 
Working Paper

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