Globalization and Endogenous Firm Scope

42 Pages Posted: 14 Jul 2006 Last revised: 3 Sep 2010

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)

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Date Written: June 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%u2019s 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.

Suggested Citation

Nocke, Volker and Yeaple, Stephen R., Globalization and Endogenous Firm Scope (June 2006). NBER Working Paper No. w12322. Available at SSRN: https://ssrn.com/abstract=912432

Volker Nocke

University of Mannheim ( email )

Stephen R. Yeaple (Contact Author)

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

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