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Economists have long puzzled over the astounding differences in productivity between firms and countries. For example, looking at disaggregated data on U.S. manufacturing industries, Syverson (2004a) found that plants at the 90th percentile produced four times as much as the plant in the 10th percentile on a per-employee basis. Only half of this difference in labor productivity could be accounted for by differential inputs, such as capital intensity. Syverson looked at industries defined at the four-digit level in the Standard Industrial Classification (SIC) system (now the North American Industry Classification System or NAICS) like “Bakeries and Tortilla Manufacturing ” or “Plastics Product Manufacturing. ” Foster, Haltiwanger, and Syverson (2008) show large differences in total factor productivity even within very homogeneous goods industries such as boxes and block ice. Some of these productivity differences across firms and plants are temporary, but in large part they persist over time. At the country level, Hall and Jones (1999) and Jones and Romer (2009) show how the stark differences in productivity across countries account for a substantial fraction of the differences in average per capita income. Both at the plant level and at the national level, differences in productivity are typically calculated as a residual—that is, productivity is

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We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing variability of West German wages has arisen from a combination of rising heterogeneity between workers, rising variability in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions. ∗We are grateful to the IAB and to Stefan Bender for assistance in making this project possible, and to Karl Schmidt, Robert Jentsch, Cerstin Erler, and Ali Athmani, for invaluable assistance in running our programs at the IAB. We also thank the Berkeley Center for Equitable Growth for funding support, and Christian Dustmann, Bernd Fitzenberger, and seminar participants at EUI Florence, Yale, Stanford, and the NBER Labor Studies meetings for many helpful comments and suggestions. Robert Heimbach, Hedvig Horvath, and Michele Weynandt provided excellent research assistance.

This article concerns the real-world importance of leader-ship for the success or failure of organizations and social institutions. The authors propose conceptualizing leader-ship and evaluating leaders in terms of the performance of the team or organization for which they are responsible. The authors next offer a taxonomy of the dependent vari-ables used as criteria in leadership studies. A review of research using this taxonomy suggests that the vast empir-ical literature on leadership may tell us more about the success of individual managerial careers than the success of these people in leading groups, teams, and organiza-tions. The authors then summarize the evidence showing that leaders do indeed affect the performance of organiza-tions—for better or for worse—and conclude by describing the mechanisms through which they do so.

um be r Family succession and firm performance: Evidence from Italian family firms

Despite popular belief among politicians and the public, the consensus amongst empirical economists is that trade has not been a major cause of increased wage inequality in advanced countries and that technological and institutional change are much more important. Recent theoretical work shows how trade can induce technical change, however. Furthermore, the consensus was reached using data predating the rise of China in the 1990s. In this paper, we examine the impact of the growth of Chinese imports on a panel of 30,000 establishments in 14 European countries. We find that Chinese import competition is associated with a significant increase in the adoption of new technology (measured by usage of information technology) and the generation of innovation (measured by patenting intensity). We also find that exposure to trade with China significantly reduce the probability of plant survival and employment growth, but this effect is significant only for low-tech firms. The wave of Chinese trade has therefore caused a within and between plant increase in average IT intensity. Despite these significant effects our calculations suggest that trade still only accounts for a relatively small proportion of the aggregate increase in technical change, so does not appear to overturn the conventional wisdom that trade is still less important than technical change.

By reducing the fear of a hostile takeover, business combination (BC) laws weaken cor-porate governance and create more opportunity for managerial slack. Using the passage of BC laws as a source of exogenous variation, we examine if these laws have a different ef-fect on firms in competitive and non-competitive industries. While firms in non-competitive industries experience a significant drop in performance after the laws ’ passage, firms in com-petitive industries experience virtually no effect. Our results are consistent with the notion that competition mitigates managerial slack. When we examine which agency problem com-petition mitigates, we find evidence in support of a “quiet-life ” hypothesis. While capital expenditures are unaffected by the passage of the BC laws, input costs, wages, and overhead costs all increase, and only so in non-competitive industries. We also conduct event studies around the dates of the first newspaper reports about the BC laws. We find that while firms in non-competitive industries experience a significant stock price decline, firms in competitive industries experience a small and insignificant price impact. ∗We thank an anonymous referee, our discussants Randall Morck (NBER), Gordon Phillips (WFA), and

This paper provides evidence about the effects of dismissals-for-cause requirements, a specific component of employment protection legislation that has received little attention despite its potential relevance. We study a quasi-natural experiment generated by a law introduced in Portugal in 1989: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to firms employing 20 or fewer workers. Using detailed matched employer-employee longitudinal data and difference-in-differences matching methods, we examine the impact of that differentiated change in firing costs upon several variables, measured from 1991 to 1999. Unlike predicted by theory, we do not find robust evidence of effects on worker flows. However, firm performance improves considerably while wages fall. Overall, the results suggest that firing costs of the type studied here decrease workers ’ effort and increase their bargaining power.