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The Anatomy of French Production Hierarchies

  • Lorenzo Caliendo
  • Ferdinando Monte
  • Esteban Rossi-Hansberg

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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File URL: http://www.nber.org/papers/w18259.pdf
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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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Publication status: published as Lorenzo Caliendo & Ferdinando Monte & Esteban Rossi-Hansberg, 2015. "The Anatomy of French Production Hierarchies," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 000 - 000.
Handle: RePEc:nbr:nberwo:18259
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  1. Rasmus Lentz & Dale T. Mortensen, 2008. "An Empirical Model of Growth Through Product Innovation," Econometrica, Econometric Society, vol. 76(6), pages 1317-1373, November.
  2. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  3. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
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  5. Guadalupe, Maria & Wulf, Julie, 2009. "The Flattening Firm and Product Market Competition," CEPR Discussion Papers 7253, C.E.P.R. Discussion Papers.
  6. Bradford J Jensen & Andrew B Bernard, 1994. "Exporters, Skill Upgrading And The Wage Gap," Working Papers 94-13, Center for Economic Studies, U.S. Census Bureau.
  7. Bernard, Andrew B. & Jensen, J Bradford & Redding, Stephen J. & Schott, Peter K., 2007. "Firms in International Trade," CEPR Discussion Papers 6277, C.E.P.R. Discussion Papers.
  8. Luis Garicano & Esteban Rossi-Hansberg, 2005. "Organization and Inequality in a Knowledge Economy," NBER Working Papers 11458, National Bureau of Economic Research, Inc.
  9. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Munich Reprints in Economics 20471, University of Munich, Department of Economics.
  10. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  11. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, vol. 79(5), pages 1453-1498, 09.
  12. Lorenzo Caliendo & Esteban Rossi-Hansberg, 2011. "The Impact of Trade on Organization and Productivity," NBER Working Papers 17308, National Bureau of Economic Research, Inc.
  13. Van Reenen, John & Caroli, Eve, 2001. "Skill-Biased Organizational Change? Evidence from a panel of British and French establishments," Economics Papers from University Paris Dauphine 123456789/10093, Paris Dauphine University.
  14. Qian, Yingyi, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 527-44, July.
  15. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  16. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
  17. Maria Guadalupe & Julie Wulf, 2010. "The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 105-27, October.
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