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Trade, Technologies and the Talent Organization

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  • Schymik, Jan
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    Abstract

    This paper introduces the theory of firm organization under moral hazard into an equilibrium model of international trade with heterogeneous talents and technologies. The model is able to explain how the allocation of power and the provision of financial incentives inside firms varies within and across industries. Variation in the value of outside options triggers owners to choose different levels of firm organization and financial incentives. While incentive compensation and centralized decision-making are substitutes for human capital scarce firms, human capital intensive firms use incentive compensation and the delegation of power as complements to keep their managers participating. Trade liberalizations and skill-biased technological changes affect the distribution of outside options and thus let firms reorganize and provide different financial incentives. Trade integrations may lead firms to endogenously choose organizations with powerful managers and consequently managerial entrenchment arises in the most productive firms. --

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    Bibliographic Info

    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79922.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79922

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    1. Nick Bloom & Raffaella Sadun & John Van Reenen, 2010. "Does Product Market Competition Lead Firms to Decentralize?," CEP Discussion Papers dp0966, Centre for Economic Performance, LSE.
    2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
    3. Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," NBER Working Papers 12365, National Bureau of Economic Research, Inc.
    4. Marin, Dalia & Verdier, Thierry, 2006. "Power Inside the Firm and the Market: A General Equilibrium Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 109, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    5. Vicente Cuñat & Maria Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1058-1082, 09.
    6. Monte, Ferdinando, 2009. "Skill Bias, Trade, and Wage Dispersion," MPRA Paper 14719, University Library of Munich, Germany.
    7. Acemoglu, D. & Newman, A.F., 1997. "The Labor Market and Corporate Structure," Working papers 97-8, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Nick Bloom & Raffaella Sadun & John Van Reenen, 2007. "Americans do I.T. better: US multinationals and the productivity miracle," LSE Research Online Documents on Economics 4555, London School of Economics and Political Science, LSE Library.
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