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The Anatomy of French Production Hierarchies

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  • Lorenzo Caliendo
  • Ferdinando Monte
  • Esteban Rossi-Hansberg

Abstract

We use a comprehensive dataset of French manufacturing firms to study their internal organization. We first divide the employees of each firm into `layers' using occupational categories. Layers are hierarchical in that the typical worker in a higher layer earns more, and the typical firm occupies less of them. In addition, the probability of adding (dropping) a layer is very positively (negatively) correlated with value added. We then explore the changes in the wages and number of employees that accompany expansions in layers, output, or markets (by becoming exporters). The empirical results indicate that reorganization, through changes in layers, is key to understand how firms expand and contract. For example, we find that firms that expand substantially add layers and pay lower average wages in all pre-existing layers. In contrast, firms that expand little and do not reorganize pay higher average wages in all pre-existing layers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18259.

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Date of creation: Jul 2012
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Handle: RePEc:nbr:nberwo:18259

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References

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  1. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(4), pages 1383-1435, November.
  2. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, Elsevier, vol. 146(1), pages 39-73, January.
  3. Rasmus Lentz & Dale T. Mortensen, 2005. "An Empirical Model of Growth Through Product Innovation," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2005-004, Boston University - Department of Economics.
  4. Eric Verhoogen, 2007. "Trade, quality upgrading and wage inequality in the Mexican manufacturing sector," Discussion Papers, Columbia University, Department of Economics 0607-08, Columbia University, Department of Economics.
  5. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2008. "An Anatomy of International Trade: Evidence from French Firms," NBER Working Papers 14610, National Bureau of Economic Research, Inc.
  6. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Andrew.B Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in international trade," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3682, London School of Economics and Political Science, LSE Library.
  8. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1127-50, September.
  9. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, Econometric Society, vol. 78(4), pages 1239-1283, 07.
  10. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, Elsevier, vol. 42(1-2), pages 3-31, February.
  11. Qian, Yingyi, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 527-44, July.
  12. Lorenzo Caliendo & Esteban Rossi-Hansberg, 2012. "The Impact of Trade on Organization and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1393-1467.
  13. Caroli, Eve & Van Reenen, John, 1999. "Skill biased organizational change? Evidence from a panel of British and French establishments," CEPREMAP Working Papers (Couverture Orange) 9917, CEPREMAP.
  14. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  15. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 874-904, October.
  16. Guadalupe, Maria & Wulf, Julie, 2009. "The Flattening Firm and Product Market Competition," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7253, C.E.P.R. Discussion Papers.
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Cited by:
  1. Marin, Dalia & Rousova, Linda & Verdier, Thierry, 2013. "Do Multinationals Transplant their Business Model?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 398, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Heyman, Fredrik & Sjöholm, Fredrik & Davidson, Carl & Matusz, Steven & Chun Zhu, Susan, 2014. "Global Engagement and the Occupational Structure of Firms," Working Paper Series, Research Institute of Industrial Economics 1026, Research Institute of Industrial Economics.
  3. Westling, Tatu, 2012. "Managerial spans, industry tasks and ICT: evidence from the U.S," MPRA Paper 39403, University Library of Munich, Germany.
  4. Luis Garicano & Claire LeLarge & John Van Reenen, 2013. "Firm Size Distortions and the Productivity Distribution: Evidence from France," NBER Working Papers 18841, National Bureau of Economic Research, Inc.
  5. Tåg, Joacim & Åstebro, Thomas & Thompson, Peter, 2013. "Hierarchies, the Small Firm Effect, and Entrepreneurship: Evidence from Swedish Microdata," Working Paper Series, Research Institute of Industrial Economics 954, Research Institute of Industrial Economics.
  6. Tåg, Joacim, 2013. "Production hierarchies in Sweden," Economics Letters, Elsevier, Elsevier, vol. 121(2), pages 210-213.
  7. Cruz, Marcio, 2014. "Do export promotion agencies promote new exporters ?," Policy Research Working Paper Series, The World Bank 7004, The World Bank.
  8. Luca David Opromolla, 2013. "Trade and wage inequality," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.
  9. Mion, Giordano & Opromolla, Luca David, 2013. "Managers’ mobility, trade performance, and wages," Working Paper Series, European Central Bank 1596, European Central Bank.

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