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Trust, firm organization, and the pattern of comparative advantage

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  • Cingano, Federico
  • Pinotti, Paolo

Abstract

Interpersonal trust favors the delegation of decisions and tasks within firms, allowing the expansion of more productive units. We show that this interaction between trust and firm organization contributes to shaping the pattern of comparative advantage: high-trust regions and countries exhibit larger value-added and export shares in delegation-intensive industries relative to other industries. Consistent with the idea that trust allows firms to expand beyond a narrow circle of family members and friends, such effects are driven by an increase in average firm size, reflecting in turn a shift of the size distribution away from the smallest firms and toward the small-to-medium ones. According to our estimates, trust is no less relevant than human or physical capital, or institutions in shaping the pattern of comparative advantage.

Suggested Citation

  • Cingano, Federico & Pinotti, Paolo, 2016. "Trust, firm organization, and the pattern of comparative advantage," Journal of International Economics, Elsevier, vol. 100(C), pages 1-13.
  • Handle: RePEc:eee:inecon:v:100:y:2016:i:c:p:1-13
    DOI: 10.1016/j.jinteco.2016.01.006
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    Cited by:

    1. Antonio Ciccone & Elias Papaioannou, 2016. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," NBER Working Papers 22368, National Bureau of Economic Research, Inc.
    2. repec:eee:worbus:v:53:y:2018:i:2:p:237-247 is not listed on IDEAS
    3. repec:eee:jbvent:v:32:y:2017:i:6:p:674-693 is not listed on IDEAS
    4. repec:eee:jeborg:v:142:y:2017:i:c:p:92-104 is not listed on IDEAS
    5. García-Vega, María & Huergo, Elena, 2017. "Trust and technology transfers," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 92-104.
    6. repec:kap:jmgtgv:v:21:y:2017:i:3:d:10.1007_s10997-016-9367-z is not listed on IDEAS

    More about this item

    Keywords

    Trust; Delegation; Comparative advantage; Firm size;

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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