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The Anatomy of French Production Hierarchies


  • Lorenzo Caliendo

    (Yale University)

  • Ferdinando Monte

    (Johns Hopkins University, Carey Business School)

  • Esteban Rossi-Hansberg

    (Princeton University)


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 characteristics. Layers are hierarchical in that the typical worker in a higher layer earns more, and the typical firm occupies less of them. Dividing firms into a collection of hierarchical layers is useful for understanding their organization, as well as changes in their organization. We show that the probability of adding (dropping) a layer is very positively (negatively) correlated with value added. We then use the theory in Caliendo and Rossi-Hansberg (2011) to guide us through an exploration of changes in the wages and number of employees as a result of expansions in layers, output, or markets. The empirical results are consistent with the theory in a large number of dimensions. In particular, the effect of changes in size and export status on wages depends crucially on whether they trigger a change in organization. If they do not, wages rise, as previously documented in the literature, while, if they do, wages in all pre-existing layers fall.

Suggested Citation

  • Lorenzo Caliendo & Ferdinando Monte & Esteban Rossi-Hansberg, 2012. "The Anatomy of French Production Hierarchies," 2012 Meeting Papers 304, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:304

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    References listed on IDEAS

    1. Yingyi Qian, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 527-544.
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    7. 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, vol. 146(1), pages 39-73, January.
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    9. repec:dau:papers:123456789/10093 is not listed on IDEAS
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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