Informal long-term relationships and mutual confidence play a crucial role in modern economies in at least two dimensions. First, the performance of firms is strongly affected by their capacity to solve organizational questions effectively and this capacity is apparently strongly related to...

Informal long-term relationships and mutual confidence play a crucial role in modern economies in at least two dimensions. First, the performance of firms is strongly affected by their capacity to solve organizational questions effectively and this capacity is apparently strongly related to...

What insights can be gained from bringing the theory of the firm to the global economy? I discuss several new features of the world economy that can be explained by incorporating the theory of the firm into the theory of international trade. Among the new features I discuss are the move to...

We develop a novel theory of mis-allocation within firms (rather than between firms) due to managers' empire building. We introduce an in- ternal capital market into a two-factor model of multi-segment firms. We show that more open markets impose discipline on competition for capital within...

What insights can be gained from bringing the theory of the firm to the global economy? I discuss several new features of the world economy that can be explained by incorporating the theory of the firm into the theory of international trade. Among the new features I discuss are the move to...

This paper develops a novel theory of capital mis-allocation within firms that stems from managers’ empire building and informational frictions within the organization. Introducing an internal capital market into a two-factor model of multi-segment firms, we show that international competition...

We present a North-South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. Based on productivity and sectoral characteristics, firms decide whether to integrate into the...

The incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders. In a dynamic, general-equilibrium Ricardian model of North-South trade, the completeness of international contracts is shown to lead to the...

Domestic institutions can have profound effects on international trade. This chapter reviews the theoretical and empirical underpinnings of this insight. Particular attention is paid to contracting institutions and to comparative advantage, where the bulk of the research has been concentrated....

Available statistics tell us little about the economic consequences of increasing global dispersion of production processes. In order to shed light on the issue, we perform grass roots detective work to uncover the geography of value added in the case of a Nokia N95 smartphone circa 2007. The...