Endogenous Firm Structure and Worker Specialization

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Endogenous Firm Structure and Worker Specialization

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2022-08

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What tasks must be performed to produce a good? Which occupations are well suited to do those tasks? And what are the gains to worker specialization within the firm? I use Brazilian administrative data to document new facts about how firms vary the types of workers that they choose to hire as they grow larger. Bigger firms hire more distinct occupations. They also hire a set of workers whose cognitive, manual, and interpersonal skills are more dispersed than at small firms. I then develop a structural model of how firms choose which types of workers to hire, and how they assign tasks to these workers. I propose a novel identification strategy for how to indirectly infer the (multi-dimensional) distribution of skill requirements for tasks that firms face and using only cross-sectional data on which occupations firms choose to hire, and in what proportion, across the firm size distribution. I estimate my model using Brazilian manufacturing firms, and show that more than 1/3 of the variance in firm level TFP is due to firms’ endogenous choices of which types of workers to hire (and how specialized those workers should be). I find that gains from increasing firm specialization are about 1.3% of output, and that the costs to shutting down worker specialization within firms are large, leading to a 9.6% decrease in total output. I find similar gains in more narrowly defined industry codes such as leather goods.

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University of Minnesota Ph.D. dissertation. 2022. Major: Economics. Advisor: Jeremy Lise. 1 computer file (PDF); 95 pages.

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Adenbaum, Jacob. (2022). Endogenous Firm Structure and Worker Specialization. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/243086.

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