> **This paper provides the first systematic and comprehensive empirical study of management and strategy consulting. We unveil the workings of this opaque industry by drawing on universal administrative business-to-business transaction data based on value-added tax links from Belgium (2002-2023).** These data permit us to document the nature of consulting engagements, take-up patterns, and the effects on client firms. We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3% of payroll on consulting, typically in episodic engagements lasting less than one year. **Using difference-in-differences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting.** We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency. Our findings broadly align with ex-ante predictions from surveyed academic economists and consulting professionals, validating the productivity-enhancing view of consulting endorsed by most practitioners though only half of academics, while lending less support to a rent-shifting view favored by many economists.
Very interesting paper, which probably aligns with fairly standard economic theory, but never the less goes heavily against the public narrative around consulting.
Approximation_Doctor on
Absolutely nothing
Say it again y’all
dweeb93 on
All the smartest people I went to school and University with went into consulting. Everyone knows it’s a complete rip-off but at least they pay well lol.
Sir_Digby83 on
Makes me phat stacks
semideclared on
I’m shocked
* Businesses spend money and expect to make money from it
Of course some how the same group thinks businesses bad as profit is above all else and a business must make the highest profit, but at that same time the business is hiring consultants that make no money for the business and are very expensive since the consultants only bring in their own high paid employees to waste time
Ramses_L_Smuckles on
I listen to consultants talk all day, most days, and I still have no idea.
DurangoGango on
Note that this about management and strategy consulting. There are a lot more types of consulting and the other types are a lot more easily encountered by the average worker.
7 Comments
> **This paper provides the first systematic and comprehensive empirical study of management and strategy consulting. We unveil the workings of this opaque industry by drawing on universal administrative business-to-business transaction data based on value-added tax links from Belgium (2002-2023).** These data permit us to document the nature of consulting engagements, take-up patterns, and the effects on client firms. We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3% of payroll on consulting, typically in episodic engagements lasting less than one year. **Using difference-in-differences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting.** We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency. Our findings broadly align with ex-ante predictions from surveyed academic economists and consulting professionals, validating the productivity-enhancing view of consulting endorsed by most practitioners though only half of academics, while lending less support to a rent-shifting view favored by many economists.
Very interesting paper, which probably aligns with fairly standard economic theory, but never the less goes heavily against the public narrative around consulting.
Absolutely nothing
Say it again y’all
All the smartest people I went to school and University with went into consulting. Everyone knows it’s a complete rip-off but at least they pay well lol.
Makes me phat stacks
I’m shocked
* Businesses spend money and expect to make money from it
Of course some how the same group thinks businesses bad as profit is above all else and a business must make the highest profit, but at that same time the business is hiring consultants that make no money for the business and are very expensive since the consultants only bring in their own high paid employees to waste time
I listen to consultants talk all day, most days, and I still have no idea.
Note that this about management and strategy consulting. There are a lot more types of consulting and the other types are a lot more easily encountered by the average worker.