Trade Liberalization and Organizational Change

We embed a simple incomplete-contracts model of organization design in a standard two-country perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms.In our model, managers decide whether or not to integrate their firms, trading off the pecuniary benefits of coordinating production decisions with the private benefits of operating in their preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits. In particular, non-integration is chosen at “low” and “high” prices, while integration occurs at moderate prices. Organizational choices also depend on the terms of trade in supplier markets, which affect the division of surplus between managers. We obtain three main results. First, even when firms do not relocate across countries, the price changes triggered by liberalization of product markets can lead to significant organizational restructuring within countries. Second, the removal of barriers to factor mobility can lead to inefficient reorganization and adversely affect consumers. Third, “deep integration” — the liberalization of both product and factor markets — leads to the convergence of organizational design across countries.

Party Members’ Preferences and the Changing Nature of Party Representation: Does Representation Change when Parties become Mini-Republics?

Giovanni Sartori famously wrote that political parties do not need to be mini-republics, yet today parties in many parliamentary democracies are moving in this direction by giving their members direct votes over important decisions, including selecting party leaders and settling policy issues. This paper explores some of the implications of these changes. It asks whether the addition of membership rights affects the types of members who are attracted: do we find a bigger gap between the preferences of party members and of party voters in parties that are more plebiscitary, as literature on members' motivations might lead us to expect? The paper examines this question both cross-sectionally and longitudinally using opinion data from the European Social Survey and newly-available party organizational data from the Political Party Database project.