Internal Labor Markets, Wage Convergence, and Investment
77 Pages Posted: 25 May 2013 Last revised: 15 Jan 2020
Date Written: January 13, 2020
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: Suggested Citation