Industry dynamics and agency

This thesis empirically investigates the effects of agency problems on endogenous managerial effort, firm performance, corporate structure and industry-wide productivity.;In the second chapter, I develop an industrial evolution model with endogenous managerial effort and endogenous organizational form. The model has heterogenous firms competing in a monopolistically competitive market, endogenous entry and exit and aggregate uncertainty. It also characterizes the relationship between a manager and an owner by a long term dynamic contract. The structural model allows me to quantify the changes in managerial behavior and distribution of firms' organizational form and, as a result, the change in aggregate productivity in response to heightened competitive pressure.;In chapter three, I estimate the model with exogenous corporate structure. Two versions of the model are considered to be able to demonstrate the differences in managerial responses when the organizational forms are different. The first one is the model where ownership is separated from management, the second is the one in which managers own their firms. The model is estimated using panel data on the Colombian Malt industry. With the estimated parameters, counterfactual experiments are conducted to quantify the importance of agency on endogenous effort and firm performance.;The final chapter considers the model described in the first essay with endogenous set of corporate structure. The model is simulated with a plausible set of parameters that generate both corporations and family owned firms in steady state equilibrium. The simulated model is used to show that competitive pressures significantly affects the organizational choice of owners. Heightened competitive pressure induce firms to choose proprietorships over corporations.