It has been documented that firm hierarchies are flattening. CEO span of control has increased significantly over time while the number of levels in the hierarchy has declined. In this paper, we establish a causal effect of competition, from trade liberalization and changing trade costs on various characteristics of organizational design. We exploit a unique panel dataset of large US firms with detailed information on firm hierarchies and managerial positions over the period 1986-1999. We find that increasing foreign competition leads to flatter firms: (i) firms reduce the number of positions between the CEO and division managers, and (ii) increase the number of positions reporting directly to the CEO. We also find that competition increases performance-based pay for division managers and affects the reporting relationships of senior officers including Chief Financial Officers and Legal Counsel. The results are generally consistent with the explanation that intensified competition increases the value of delegation and fast decision-making, causing multidivisional firms to redesign their organizations to be more adaptive to local information while simultaneously coordinating activities across divisions.

In this paper, we develop a model of technology adoption and economic growth in which households optimally obtain either a concept-based, “general ” education or a skill-specific, “vocational ” education. General education is costly to obtain, but enables workers to operate new production technologies. Firms weigh the cost of adopting and operating new technologies against increased profits and optimally choose the level of adoption. We show that an economy whose policies favor vocational education will grow slower in equilibrium than one that favors general education. More importantly, the gap between their growth rates will increase with the growth rate of available technology. By characterizing the optimal Ramsey education policy we demonstrate that the optimal subsidy for general education increases with the growth rate of available technology as well. Our theory suggests that European education policies that favored specialized, vocational education might have worked well, both in terms of growth rates and welfare, during the 60s and 70s when available technologies changed slowly. However, in the information age of the 80s and 90s when new technologies emerged at a more rapid pace, they might have contributed to suboptimally slow growth and increased the growth gap relative to the US.

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provided excellent research assistance. Comments by Alan Krueger and Timothy Taylor were

The acceleration of productivity since 1995 has prompted a debate over whether the economy's underlying growth rate will remain high. In this paper, we draw on growth theory to identify variables other than productivity— namely consumption and labor compensation—to help estimate trend productivity growth. We treat that trend as a common factor with two "regimes " high-growth and low-growth. Our analysis picks up striking evidence of a switch in the mid-1990s to a higher long-term growth regime, as well as a switch in the early 1970s in the other direction. In addition, we find that productivity data alone provide insufficient evidence of regime changes; corroborating evidence from other data is crucial in identifying changes in trend growth. We also argue that our methodology would be effective in detecting changes in trend in real time: In the case of the 1990s, the methodology would have detected the regime switch within one quarter of its actual occurrence according to subsequent data.

During the 1990s there were three back-to-back events that stimulated investment in information technology: telecommunications deregulation in 1996, the ``year 2K' ' problem in 1998-99, and the ``dot com' ' boom in 1999-2000. The resulting investment boom led to dramatic run-up of stock prices for information technology companies.

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ABSTRACT: We weigh into the debate about whether rising productivity is ever a consequence rather than a cause of exporting. Exporting and investing to raise productivity are complimentary activities. For lower-productivity firms, incurring the fixed costs of such investments is justifiable only if accompanied by the larger sales volumes that come with exporting. Lower foreign tariffs will induce these firms to simultaneously export and invest in productivity. In contrast, lower foreign tariffs will induce higher-productivity firms to export without investing, as in Melitz (2003). We model this econometrically using a heterogeneous response model. Unique ‘plant-specific ’ tariff cuts serve as our instrument for the decision of Canadian plants to start exporting to the United States. We find that those lower-productivity Canadian plants that were induced by the tariff cuts to start exporting (a) increased their labour productivity, (b) engaged in more product innovation, and (c) had high adoption rates of advanced manufacturing technologies.

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By extrapolating Gordon's (1990) measures of the quality-bias in the ocial price indexes, we construct quality-adjusted price indexes for 24 types of equipment and software (E&S) from 1947 to 2000 and use them to measure technical change at the aggregate and at the industry level. Technological improvement in E&S accounts for an important fraction of postwar GDP growth and plays a key role in the productivity resurgence of the 1990s. Driving this finding is 4 percent annual growth in the quality of E&S in the postwar period and more than 6 percent annual growth in the 1990s. The acceleration in the 1990s occurred in every industry, consistent with the idea that information technology represents a general purpose technology.