We build a multicountry dynamic general equilibrium model to study the economic effects of the 2004 enlargement of the European Union. In our model, trade is costly and households of different skills and nationalities face costly forward-looking migration decisions. We exploit the timing of migration policy changes to identify the changes in migration costs. We find that the changes in migration and trade policy resulted in aggregate welfare gains but with heterogeneous effects across skill groups. We study the interaction between trade and migration policies and highlight the importance of trade for quantifying the welfare and migration effects of labor market integration.
Using employer-employee matched and firm production quantity and input data for Portuguese firms, we study the endogenous response of productivity to firm reorganizations as measured by changes in the number of management layers. We show that, as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity-based productivity increases by about 6%, while revenue-based productivity drops by around 3%. Such a reorganization makes the firm more productive but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity as well.