Internal Labor Markets, Wage Convergence, and Investment

77 Pages Posted: 25 May 2013 Last revised: 15 Jan 2020

See all articles by Rui Silva

Rui Silva

NOVA School of Business and Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 13, 2020

Abstract

I document wage convergence in conglomerates using detailed plant-level data: workers in low-wage industries collect higher-than-industry wages when the diversified firm also operates in high-wage industries. I confirm this effect by exploiting the implementation of NAFTA and changes in minimum wages at the state-level as sources of exogenous increases in wages in some plants. I then track the evolution of wages of the remaining workers of the firm, relative to workers of unaffiliated plants. Plants where workers collect higher-than-industry wages operate with higher capital intensity, suggesting that internal labor markets may affect investment decisions in internal capital markets.

Keywords: Conglomerates, Wages, Investment, Firm Boundaries, Internal Labor Markets, Internal Capital Markets

JEL Classification: G31, G34, J31, J51, L22

Suggested Citation

Silva, Rui, Internal Labor Markets, Wage Convergence, and Investment (January 13, 2020). US Census Bureau Center for Economic Studies Paper No. CES-WP-13-26, Available at SSRN: https://ssrn.com/abstract=2269253 or http://dx.doi.org/10.2139/ssrn.2269253

Rui Silva (Contact Author)

NOVA School of Business and Economics ( email )

Rua da Holanda, no. 1
Carcavelos, 2775-405
Portugal

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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