The Anatomy of French Production Hierarchies
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.
Caliendo, Lorenzo; Monte, Ferdinando; and Rossi-Hansberg, Esteban, "The Anatomy of French Production Hierarchies" (2012). Cowles Foundation Discussion Papers. 2230.