We develop a two-country model with two industries: the smokestack manufacturing industry, which generates pollution, and the transboundary renewable resource industry. With no trade, migration occurs from the foreign country, with lower manufacturing productivity, to the home country. If the gap in pollution abatement technology, which is superior in the home country, dominates the productivity gap, both countries gain from migration. Under a free trade equilibrium, we also show that if the marginal harvest of the resource industry in the home country is lower than marginal damage of manufacturing while that is higher in the foreign country, migration still causes positive effects on the stock of renewable resources, which should improve both countries’ welfare.
JEL Classification: F22, Q20

View full abstract

Recent years have witnessed that firm hierarchies are becoming flatter amid globalization. Span of control (Span) has broadened and the number of levels (Layer) within firms has declined. Motivated by these changes in the world, international trade theory has recently incorporated a rich organizational model into trade and heterogeneous firm contexts. However, empirical evidence for this theory has been so far limited because of the constrained data availability. This paper fills a part of this gap by exploiting a unique firm-level organization data in Japan, by which we can ascertain the relationship between a firm’s organization and its characteristics. Globalization, which is measured by the firm’s foreign sales ratio, has a positive link with Span, but has a negative link with Layer. This finding implies that organizational change is one source of learning effects of globalization.

View full abstract