Discussion Paper Details

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Title: Productivity and Organization in Portuguese Firms

Author(s): Lorenzo Caliendo, Giordano Mion, Luca David Opromolla and Esteban Rossi-Hansberg

Publication Date: December 2015

Keyword(s): firm size, layers, managers, organization, productivity, TFP and wages

Programme Area(s): Industrial Organization, International Trade and Regional Economics and Labour Economics

Abstract: The productivity of firms is, at least partly, determined by a firmís 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.

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Bibliographic Reference

Caliendo, L, Mion, G, Opromolla, L and Rossi-Hansberg, E. 2015. 'Productivity and Organization in Portuguese Firms'. London, Centre for Economic Policy Research.