Organizational Change and Skill Accumulation

Abstract

We model the links between skills and changes in work organization. As the proportion of skilled workers increases, the economy travels through a sequence of organizational equilibria. We show that as the relative supply of skills increases the organization of work becomes more decentralized. Both skilled and unskilled workers become more autonomous and perform a wider range of tasks: decentralization spreads across firms at the expense of the old centralized organization based on a strict division of labor. Moreover, as firms switch to decentralization, their employment structure becomes more homogeneous and wage inequality stops decreasing. These predictions are compared with empirical evidence based on French establishment-level data and we find support for both of them. This suggests that the long-term increase in the skill level of the workforce may have been one important factor driving the recent introduction of new work practices by a large number of firms.