This paper provides a new mechanism to explain variation in firm productivity across locations: variation in the internal organization of labor into hierarchical layers, which are associated with different responsibilities within the firm. To guide my analysis, I develop a theoretical model that yields two implications. First, firms in larger markets organize into a greater number of layers. Second, because they have more layers, firms in larger markets are more productive. I then use administrative data to examine the model’s implications across French employment areas and non-tradeable service industries that satisfy the model’s assumptions: Clothing and Shoe Retail, Traditional Restaurants, and Hair and Beauty Salons. The findings are consistent with the model. I also observe that 8.8% to 22.4% of the log productivity gains from denser areas arise from differences in the organization of firms. A separate analysis shows that results are similar across firms operating in the manufacturing sector.
Firm organization and productivity across locations
Résumé
en
This paper provides a new mechanism to explain variation in firm productivity across locations: variation in the internal organization of labor into hierarchical layers, which are associated with different responsibilities within the firm. To guide my analysis, I develop a theoretical model that yields two implications. First, firms in larger markets organize into a greater number of layers. Second, because they have more layers, firms in larger markets are more productive. I then use administrative data to examine the model’s implications across French employment areas and non-tradeable service industries that satisfy the model’s assumptions: Clothing and Shoe Retail, Traditional Restaurants, and Hair and Beauty Salons. The findings are consistent with the model. I also observe that 8.8% to 22.4% of the log productivity gains from denser areas arise from differences in the organization of firms. A separate analysis shows that results are similar across firms operating in the manufacturing sector.
D - Microeconomics/D.D2 - Production and Organizations/D.D2.D22 - Firm Behavior: Empirical Analysis
L - Industrial Organization/L.L1 - Market Structure, Firm Strategy, and Market Performance/L.L1.L11 - Production, Pricing, and Market Structure • Size Distribution of Firms
L - Industrial Organization/L.L2 - Firm Objectives, Organization, and Behavior/L.L2.L22 - Firm Organization and Market Structure
L - Industrial Organization/L.L2 - Firm Objectives, Organization, and Behavior/L.L2.L23 - Organization of Production
J - Labor and Demographic Economics/J.J2 - Demand and Supply of Labor/J.J2.J24 - Human Capital • Skills • Occupational Choice • Labor Productivity
R - Urban, Rural, Regional, Real Estate, and Transportation Economics/R.R1 - General Regional Economics/R.R1.R12 - Size and Spatial Distributions of Regional Economic Activity
Projet(s) ANR
Développement et construction d'un Centre d'Accès Sécurisé Distant aux données confidentielles (CASD) pour la recherche française en sciences sociales et en économie.
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CASD -
ANR-10-EQPX-0017
EQPX
- 2010
Marchés locaux du travail : différences spatiales des performances des individus sur leur marché du travail en France et en Allemagne
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LOCLABMARKET -
ANR-15-FRAL-0007
FRAL
- 2015
Financement
- Aix-Marseille School of Economics (AMSE) - French National Research Agency (ANR) project "Local Labour Markets: The Causes and Consequences of Spatial Differences in Labour Market Outcomes across Cities in France and Germany" ANR-15-FRAL-0007 - Swiss National Foundation (FNS) project "Multinational Corporations: On the Relation Between the Complexity of the Knowledge Base and the Geographical and Functional Structure of the Business Group" FNS 100018_176445 - ANR as part of the "Investing for the Future" program ("Le Progamme d'Investissements d'Avenir") ANR-10-EQPX-17