Working Paper: NBER ID: w19409
Authors: Volker Nocke; Stephen Yeaple
Abstract: We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the documented cross-sectional correlations in firm performance measures, including why larger firms are more productive and more diversified, and yet more diversified firms trade at a discount. Globalization is shown to induce heterogeneous responses across firms in terms of scope and productivity, some of which are consistent with existing empirical work, while others are potentially testable.
Keywords: multiproduct firms; globalization; productivity; market-to-book ratio
JEL Codes: F12; F15; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| organizational efficiency (L21) | optimal ratio of organizational capital to number of products (D29) |
| optimal ratio of organizational capital to number of products (D29) | total factor productivity (TFP) (D24) |
| organizational efficiency (L21) | total factor productivity (TFP) (D24) |
| firm size (L25) | total factor productivity (TFP) (D24) |
| firm size (L25) | market-to-book ratio (G32) |
| diversification (G11) | market-to-book ratio (G32) |
| trade liberalization (F13) | diversification (exporters) (F10) |
| trade liberalization (F13) | diversification (non-exporters) (F29) |
| diversification (exporters) (F10) | total factor productivity (TFP) (D24) |
| diversification (non-exporters) (F29) | total factor productivity (TFP) (D24) |