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Trade, Technologies and the Talent Organization

Listed author(s):
  • Schymik, Jan

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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File URL: https://www.econstor.eu/bitstream/10419/79922/1/VfS_2013_pid_118.pdf
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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
Handle: RePEc:zbw:vfsc13:79922
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Dalia Marin & Thierry Verdier, 2008. "Power Inside The Firm and The Market: A General Equilibrium Approach," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 752-788, 06.
  2. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, vol. 102(1), pages 167-201, February.
  3. Marin, Dalia & Schymik, Jan & Tarasov, Alexander, 2014. "Trade in Tasks and the Organization of Firms," Discussion Papers in Economics 21741, University of Munich, Department of Economics.
  4. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2014. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," Management Science, INFORMS, vol. 60(12), pages 2859-2885, December.
  5. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Does Product Market Competition Lead Firms to Decentralize?," American Economic Review, American Economic Association, vol. 100(2), pages 434-438, May.
  6. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 49-100.
  7. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  8. Acemoglu, Daron & F. Newman, Andrew, 2002. "The labor market and corporate structure," European Economic Review, Elsevier, vol. 46(10), pages 1733-1756, December.
  9. Marko Tervio, 2008. "The Difference That CEOs Make: An Assignment Model Approach," American Economic Review, American Economic Association, vol. 98(3), pages 642-668, June.
  10. 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.
  11. Monte, Ferdinando, 2011. "Skill bias, trade, and wage dispersion," Journal of International Economics, Elsevier, vol. 83(2), pages 202-218, March.
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