题目：Openness, Managerial Incentives and Heterogeneous Firms

报告人：Zhihong Yu, University of Nottingham

时间：2:00-3:30pm,September 14

地点：成人直播新楼217教室

Abstract:

This paper examines the effects of trade openness on managerial incentives and firm-level productivity by incorporating the principal-agent mechanism into the heterogeneous firm trade framework inter alia Melitz (2003 Econometrica). We show that opening up to trade generally leads to a steeper optimal managerial incentive scheme (and hence higher firm productivity) via a new mechanism where selection of heterogeneous firms into the export market plays a key role. The reason is that trade openness triggers a “carrot-and-stick” effect resulting from the intra-industry reallocation towards ex post lowest-cost exporters, which unambiguously increases the variation of firm profits , and thus the stakes of the market game faced by the principals. Interestingly, it is further shown that, whilst falling variable trade costs unambiguously increase managerial incentives, a reduction in fixed trade costs could possibly lead to weaker incentives, and thus generate productivity losses due to an adverse inter-firm reallocation effect. Hence, the model establishes a causal link between the Melitz-type reallocation effect and the within-firm productivity changes induced by increasing openness, both of which have been identified as important sources of aggregate productivity gains from trade by recent empirical studies.