Featured paper · 2021
Lack of Selection and Limits to Delegation: Firm Dynamics in Developing Countries
A model that explains why firms in poorer countries do not grow. The mechanism is delegation: when an entrepreneur cannot trust a hired manager, the firm is capped at the size the founder can personally oversee. The paper estimates the cost of that ceiling at the macro level.
Ufuk Akcigit, Harun Alp, Michael Peters. American Economic Review, 2021.
The policy line
The size distribution of firms in poor countries is not a technology problem. It is an institutional one: contract enforcement, accounting standards, and managerial labor markets.
Summary
A model that explains why firms in poorer countries do not grow. The mechanism is delegation: when an entrepreneur cannot trust a hired manager, the firm is capped at the size the founder can personally oversee. The paper estimates the cost of that ceiling at the macro level.
The Academy uses this paper as a primary text across its five pillars. The full text is available at the publisher.
