Globalization and Endogenous Firm Scope

42 Pages Posted: 7 Jun 2006

See all articles by Volker Nocke

Volker Nocke

University of Mannheim

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 3, 2006

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

JEL Classification: F12, F15, L11, L25

Suggested Citation

Nocke, Volker and Yeaple, Stephen R., Globalization and Endogenous Firm Scope (June 3, 2006). PIER Working Paper No. 06-015. Available at SSRN: https://ssrn.com/abstract=907079 or http://dx.doi.org/10.2139/ssrn.907079

Volker Nocke (Contact Author)

University of Mannheim ( email )

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic ( email )

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University Park, PA 16802-3306
United States
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National Bureau of Economic Research (NBER)

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