Trade, Labor Markets and the Organization of Production within Firms

The main research question of this thesis is how globalization shapes the organization of production within firms, with a particular focus on the role of labor market imperfections in open economies. For that reason, I make use of three different models to investigate the interaction between firm organization and labor market imperfections in the process of globalization. Thereby, the organization of production is discussed from different perspectives: (i) the number of products a firm is willing to produce and (ii) the organization of labor within firms. In each chapter, I use a different approach to account for imperfections in factor markets. This allows a broad discussion on how labor market institutions affect the equilibrium outcome in closed and open economies, and how these imperfections affect a firm's organization choice. After a short introduction in Chapter 1, Chapter 2 sets up a general oligopolistic equilibrium model with multi-product firms and union wage setting. In this model, two policy experiments are conducted. First, it is shown that deunionization induces a general decline in firm scale and scope, with the respective reduction being more pronounced in non-unionized industries. Second, the consequences of trade liberalization are studied, and it is shown that access to foreign markets lowers firm scope in all industries as well as the scope differential between unionized and non-unionized firms. Adjustments in firm scale turn out to be less clearcut and inter alia depend on the degree of product differentiation. Chapter 3 looks inside the firm and investigates how trade alters the matching of worker-specific abilities and task-specific skill requirements. The outcome of this matching process depends on how firms organize their recruitment process and how much they invest into the screening of applicants. In the open economy, the most productive firms start exporting. They increase their market share and therefore find it attractive to increase their screening investment, which improves the matching outcome. Things are different for non-exporters, whose market share shrinks in the open economy, lowering their incentive to invest for screening applicants. Due to this asymmetric response, access to trade raises the dispersion of productivity between heterogeneous producers, while at the same time increasing the average quality of worker-task matches and thus economy-wide labor productivity. Chapter 4 sets up a heterogeneous firms model, where production consists of a continuum of tasks and firms hire low-skilled and high-skilled workers for the performance of tasks, which differ in their complexity. How firms assign workers to tasks depends on factor prices for the two skill types and the productivity advantage of high-skilled workers in the performance of complex tasks. After characterizing the closed economy equilibrium with fully flexible wages, I show how firms adjust the assignment of workers top tasks in response to the introduction of a binding real minimum wage for low-skilled workers and migration of low-skilled or high-skilled workers. With a minimum wage, the opening up for trade reduces the range of tasks performed by high-skilled workers. It furthermore leads to a higher per-capita income of both skill types, which implies a higher welfare in the open than in the closed economy, while inequality between the two skill types increases. In an extension, I discuss how the firm-internal assignment of skills to tasks is affected by labor market linkages in open economies.

Level thesis:degree_level

thesis.doctoral

Grantor dc:publisher

Universität Bayreuth

Year

2013

Author dc:creator

• Koch, Michael

Contributors dc:contributor

• Egger, Hartmut

Repository record source_url

https://epub.uni-bayreuth.de/id/eprint/94/

OAI identifier oai:identifier

oai:epub.uni-bayreuth.de:94