Wednesday, November 15, 2017 - 14:30
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Prof. Kalina Manova (Oxford)
We present a heterogeneous-firm model in which management ability increases both production efficiency and quality capacity. Better managed firms use more sophisticated inputs and assembly technologies to more efficiently produce goods of higher quality. Combining six micro-datasets on management practices, production and trade in Chinese and American firms, we find support for the modelís predictions in both countries. First, better managed firms are more likely to export, sell more products to more destination countries, and earn higher export revenues and profits. Second, better managed exporters have higher prices,higher quality, and lower quality-adjusted prices. They also source more imported inputs,a wider range of inputs, more expensive inputs, and more inputs from advanced economies.The structural estimates from our model indicate that management is important for improving production efficiency and product quality in both countries, but it matters more in China than in the US, especially for product quality. Panel analysis for the US and a randomized control trial in India suggest that management exerts causal effects. Poor management practices may thus hinder trade, growth and entrepreneurship in developing countries.