TY  - JOUR
AU  - Caliendo,Lorenzo
AU  - Rossi-Hansberg,Esteban
TI  - The Impact of Trade on Organization and Productivity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17308
PY  - 2011
Y2  - August 2011
UR  - http://www.nber.org/papers/w17308
L1  - http://www.nber.org/papers/w17308.pdf
N1  - Author contact info:
Lorenzo Caliendo
Yale University
School of Management
135 Prospect Street
New Haven, CT 06520
Tel: 203/432-4069
E-Mail: lorenzo.caliendo@yale.edu

Esteban Rossi-Hansberg
Princeton University
Department of Economics
Fisher Hall
Princeton, NJ 08544-1021
Tel: 609/2584024
Fax: 650/725-5702
E-Mail: erossi@princeton.edu
AB  - A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%.
ER  -