From Micro to Macro via Firms as Organizations: Firm Dynamics Analysis


This course aims at presenting the main tools proposed by economists to understand why firms emerge as organizations, why they are heterogeneous and what are the implications for policy interventions.

The textbook perspective to go from micro to macro is to consider that atomistic agents interact and coordinate via market mechanisms, which aggregate their micro behavior into macro outcomes. This perspective, however, has since long proved too limited. Agents organize in organizations – primarily, firms – which renders pure markets mechanisms less relevant to understand aggregate outcomes.

This course presents several contributions aiming at both documenting this fact, and improve our understanding of how business organizations emerge and (sometimes) become of macro-economic significance.

At the end of this course, students must:

–         Have a knowledge of the main models of the literature proposing "theories of the firm" (of their emergence, their heterogeneity).
–         Know the main empirical strategies that have been developed to test these theories, as well as the econometric and statistical tools necessary for their implementation and articulation (in particular: moment methods, qualitative variable models, etc.)


  1. The theoretical toolbox: several theories of the firm of the literature (transaction costs, property rights, span of control, risk aversion, hierarchies)
  2.  The empirical toolbox: What do we know about firm heterogeneity? (productivity estimation, demand and mark-ups, empirical analysis of networks)
  3. Frictions and misallocation: firm heterogeneity, taxes and other wedges, and the allocation of production factors. Focus on the sufficient statistics approach of these issues.
  4. Market structure (input, output, financial) and fluctuations/industry dynamics. Focus on several “endogenous decisions” affecting these outcomes: innovation (R&D), quality of management, consumer search.


Ackerberg, D., L. Benkard, S. Berry and A. Pakes, (2007), “Econometric Tools for Analyzing Market Outcomes”, ch. 63 in Heckman, J.J. and Leamer, E.E. eds., Handbook of Econometrics, vol. 6A, Elsevier.
Gibbons, R. and J. Roberts, Ed. (2012), The Handbook of Organizational Economics, Princeton University Press.
Hart, O. (1995), Firms, Contracts, and Financial Structure, Oxford University Press
Sutton, J. (1998), Technology and Market Structure, MIT Press.