Empirical studies on information communication technologies (ICT)
typically aggregate the "information" and "communication" components
together. We show theoretically and empirically that these have very
different effects on the empowerment of employees, and by extension on
wage inequality. If managerial hierarchies are devices to acquire and
transmit knowledge and information, technologies that reduce information
costs enable agents to acquire more knowledge and 'empower' lower level
agents. Conversely, technologies reducing communication costs
substitute agent's knowledge for directions from their managers, and
lead to centralization. Using an original dataset of firms in the US and
seven European countries we study the impact of ICT on worker autonomy,
plant manager autonomy and spans of control. Consistently with the
theory we find that better information technologies (Enterprise Resource
Planning for plant managers and CAD/CAM for production workers) are
associated with more autonomy and a wider span of control. By contrast,
communication technologies (like data networks) decrease autonomy for
both workers and plant managers. Our findings are robust to using
exogenous variation in cross-country telecommunication costs arising
from differential regulatory regimes.
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