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Abstract:

cover
CEP Discussion Paper
Productivity and Organization in Portuguese Firms
Lorenzo Caliendo, Giordano Mion, Luca David Opromolla and Esteban Rossi-Hansberg December 2015
Paper No' CEPDP1397:
Full Paper (pdf)

JEL Classification: D22; D24; L23; F16; J24; J31


Tags: productivity; organization; wages; managers; layers; tfp; firm size

The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity-based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.