Globalization and Endogenous Firm Scope

Volker Nocke and Stephen Yeaple

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We develop a theory of multiproduct firms to analyze the effects of globalization on the distributions of firm size, scope, and productivity. Our model explains two puzzles. First, it explains the well-known size-discount puzzle: large firms have lower values of Tobin’s Q than small firms. Second, it explains the globalization-skewness puzzle documented in the empirical part of our paper: a multilateral reduction in trade costs leads to a flattening of the size distribution of firms. In our model, globalization not only affects the distribution of observed productivities but also productivity at the firm level.

Keywords: multiproduct firms; firm size distribution; trade liberalization; size discount; firm heterogeneity; productivity (search for similar items in EconPapers)
JEL-codes: F12 F15 L11 L25 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2006-06-03
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (104)

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Working Paper: Globalization and Endogenous Firm Scope (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:06-015

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