Hierarchical Organization and Performance Inequality: Evidence from Professional Cycling. Bertrand Candelonyand Arnaud Dupuyz April 3, 2012 Abstract This paper proposes an equilibrium theory of the organization of work in an economy with an implicit market for productive time. In this market, agents buy or sell productive time. This implicit mar- ket gives rise to the formation of teams, organized in hierarchies with We thank Yin-Wong Cheung, Xavier Gabaix, Alfred Galichon, Michael Sattinger and Jesper van Thor and seminar participants at Ecole Polytechnique and Maastricht Univer- sity for their valuable comments and Sander Dijksman for his data assistance. yDepartment of economics, Maastricht University zCorresponding address: ROA and department of economics, Maas- tricht University PO Box 616, NL-6200 MD, The Netherlands. Email:
[email protected]. 1 one leader (buyer) at the top and helpers (sellers) below. Relative to autarky, hierarchical organization leads to higher within and between team payo¤s/productivity inequality. This prediction is tested empir- ically in the context of professional road cycling. We show that the observed rise in performance inequality in the peloton since the 1970s is merely due to a rise in help intensity within team and consistent with a change in the hierarchical organization of teams. JEL Classi…cation: D2, D3 and L22. Keywords: Hierarchical organization, productive time, helping time, inequality, professional cycling. 2 1 Introduction Many economies have witnessed a rising wage inequality in the last 5 decades (Acemoglu and Autor, 2010 and Acemoglu, 2003) alongside with large changes in many …rms’ organizational structure (see e.g. Rajan and Wulf, 2006).