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Accession Number PB2013-110998
Title Internal Labor Markets and Investment in Conglomerates.
Publication Date Apr 2013
Media Count 62p
Personal Author R. Silva
Abstract The literature on conglomerates has focused on the misallocation of investments as the cause of the conglomerate discount. I study frictions in the internal labor market as a possible cause of misallocation of investments. Using detailed plant-level data, I document wage convergence in conglomerates: workersin low-wage industries collect higher-than-industry wages when the diversified firm is also present in high-wage industries (by 5.2%). I confirm this effect by exploiting a quasi-experiment involving the implementation of the NAFTA agreement that exogenously increases worker wages of exporting plants. I track the evolution of wages in nonexporting plants in diversifed rms that also own exporting plants and find a signifcant increase in wages of these plants relative to unafliated non-exporting plants after the event. This pattern of wage convergence affects investments. Plants where workers collect higher-than-industry wages increase the capital-labor ratio in response to their higher labor cost -- and this response to higher wages is associated with higher investment in some divisions.
Keywords Businesses
Capital
Conglomerates
Convergence
Costs
Exports
Implementation
Industries
Investments
Labor market
Wages
Workers


 
Source Agency Department of Commerce, Bureau of Census
NTIS Subject Category 96A - Domestic Commerce, Marketing, & Economics
96C - International Commerce, Marketing, & Economics
Corporate Author London Business School (England).
Document Type Technical report
Title Note N/A
NTIS Issue Number 1324
Contract Number N/A

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