Coordination Costs and Organizational Changes in the New Economy

An important aspect, observed in the last decade with the diffusion of Information and Communication Technologies, is the adoption by many firms of new organizational practices (for instance job rotation, work teams, quality norms), characterized by a tendency towards multi-tasking. This phenomenon initially appeared in the United States, and then has expanded over to Europe. As a consequence, a consistent literature has studied the effects of these organizational changes, both on firms performance on the one hand and on working conditions (in particular occupational health and safety) on the other hand. With reference to the first aspect, most of these works show a positive impact of new work practices on productivity, and an effect represented by upskilling of workers. With reference to the second aspect, the available studies lead to conflicting conclusions, since some of them evidence a positive relation between new organizational practices and workers well-being (for instance quality norms reduce failures, improving occupational safety, and job rotation makes work more interesting), while others evidence opposite results (new work practices increase the pressure on workers for performance, raising the risk of injuries as well as mental strain). It is therefore crucial to clarify these aspects, since the working conditions in the new economy are a key element that must be taken into account in the evaluation of the performance and of the long-run viability of the new productive paradigms. In particular, if the new work practices increase the risk of work injuries or illnesses we would have increase of absenteeism and of social conflicts and decrease of workers' satisfaction and of labor productivity, and this would affect the future development of the “new economy”. In such a context, this paper considers a theoretical model that tries to study some effects of multi-tasking in an economy in which individuals devote time both to production and to human capital accumulation, and in which they are involved in many tasks. In this model, the presence of multi-tasking gives rise to coordination costs for the firms (an increase in the number of tasks per worker increases output but it also reduces profits through an increase in coordination costs, due to interactions among tasks) and to disutility for the individuals (an increase in the number of tasks per worker increases work rhythms, and in this way it induces disutility). The paper considers both the decentralized economy (in which households and firms solve separately their optimization problems) and the centralized economy (in which a central planner acts), and it shows that the social optimum is characterized, at the steady-state, by a number of tasks per worker lower than the number obtained in the decentralized economy. Furthermore, also production and consumption are lower in correspondence of the social optimum than in the decentralized economy. The decentralized solution in this model is therefore sub-optimal, and the last part studies a policy that can be implemented in order to correct such sub-optimality.