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Firm organization and productivity across locations

Abstract : 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.
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Submitted on : Monday, October 25, 2021 - 2:20:01 PM
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Grigorios Spanos. Firm organization and productivity across locations. Journal of Urban Economics, Elsevier, 2019, 112, pp.152-168. ⟨10.1016/j.jue.2019.05.006⟩. ⟨hal-02271020⟩



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