Three Essays on Firm Organization and Trade

This thesis examines how firms organize production and its relationship to international trade.In Chapter 1 I examine the assignment of workers to layers and firms. I use an administrative dataset of French workers to study the organization of manufacturing firms. First, I test whether higher ability workers are employed in the higher layers of firms. Second, I test whether there is positive assortative matching between workers in the different layers of firms. Third, I test whether abler managers supervise more workers. Finally, I test whether abler workers allow their managers to increase their span of control. I emphasize four results. First, abler workers are employed in the higher layers of firms. Second, I find evidence of positive assortative matching between workers in the different layers of firms. Third, I find evidence that abler managers supervise less workers. Finally, I also find weak evidence that abler workers allow their managers to increase their span of control.In chapter 2 I investigate the effect market toughness has on the organization of firms. To understand this relationship I develop a monopolistically competitive model with endogenous markups and heterogeneous firms. As in Garicano (2000) and Caliendo and Rossi-Hansberg (2012), production requires physical labour and knowledge. In the model, market size affects markups which then affects how firms organize production and their productivity. I also analyze how the distribution of organizations varies across markets of different sizes. The model predicts that in larger markets firms will have more layers, consistent with the data.In chapter 3 I examine the impact of international trade on the sorting of heterogeneous agents into sectors and occupations, and within sectors the matching of agents into teams, as well as the impact of trade on the distribution of earnings. To understand this relationship I extend Garicano and Rossi-Hansberg (2004) to two goods and two countries. I emphasize three results. First in an open economy, factor price equalization does not hold. Second, in a given sector, the returns to managers and production workers change in the same direction. And third whether international trade increases or decreases income inequality depends on the knowledge of the country.Ph.D