The Impact of Trade on Organization and Productivity / Lorenzo Caliendo, Esteban Rossi-Hansberg.

Format:

Book

Author/Creator:

Caliendo, Lorenzo.

Contributor:

National Bureau of Economic Research.

Rossi-Hansberg, Esteban.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17308.

NBER working paper series no. w17308

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%.

Notes:

Print version record

August 2011.