COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1867 The Anatomy of French Production Hierarchies Lorenzo Caliendo, Ferdinando Monte, and Esteban Rossi-Hansberg July 2012 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 categories. Layers are hierarchical in that the typical worker in a
higher layer earns more, and the typical firm occupies less of them. In addition, the
probability of adding (dropping) a layer is very positively (negatively) correlated with
value added. We then explore the changes in the wages and number of employees that
accompany expansions in layers, output, or markets (by becoming exporters). The empirical
results indicate that reorganization, through changes in layers, is key to understand how
firms expand and contract. For example, we find that firms that expand substantially add
layers and pay lower average wages in all pre-existing layers. In contrast, firms
that expand little and do not reorganize pay higher average wages in all
pre-existing layers. |
