Partnerships versus corporations: Moral hazard, sorting, and ownership structure

Ayça Kaya, Galina Vereshchagina

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

Team production takes advantage of technological complementarities but comes with the cost of free-ridership. When workers differ in skills, the choice of sorting pattern may be associated with a nontrivial trade-off between exploiting the technological complementarities and minimizing the cost of free-ridership. This paper demonstrates that whether such a trade-off arises depends (i) on how the power of incentives required for effort provision varies with workers' types, and (ii) on whether the workers are organized for production in partnerships or in corporations. These results have implications for how production is organized in different industries-in partnerships or in corporations.

Original languageEnglish (US)
Pages (from-to)291-307
Number of pages17
JournalAmerican Economic Review
Volume104
Issue number1
DOIs
StatePublished - Jan 1 2014
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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