Internal Labor Markets, Wage Convergence, and Investment

Silva, Rui C.

doi:10.1017/s0022109020000277

Cited by 19 publications

(6 citation statements)

References 84 publications

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“…This literature has shown that firm boundaries matter for capital and R&D allocation (Seru, 2014;Giroud and Mueller, 2015). A large body of work has presented evidence that is consistent with a cross-subsidization pattern in investment and labor (Shin and Stulz, 1998;Rajan, Servaes and Zingales, 2000;Stein, 1997;Ozbas and Scharfstein, 2009;Silva, 2016), though several papers argue against such evidence (Chevalier, 1999;Maksimovic and Philips, 2001;Whited, 2001;Çolak and Whited, 2007;and Custódio, 2014). Our paper extends this literature by suggesting that organization structure may itself be designed to foster the ability of firms to use internal capital markets when these are most valuable.…”

Section: Introductionmentioning

confidence: 54%

Financial market frictions and diversification

Matvos

Seru

Silva

2018

Journal of Financial Economics

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We document new facts, which relate the evolution of firm scope to the changing frictions in external capital markets over the last three decades. In the first part of the paper we study the scope of large, diversified publicly traded firms. We find that these firms increase their scope during times of high external capital market frictions, such as in the recent Great Recession. Moreover, during these times firms diversify their investment needs, and cash flows across industries. In the second part, we find similar phenomena outside diversified public firms. Examining the mergers and acquisitions activity of standalone and diversified private firms, we uncover similar patterns. In aggregate data, we find that the composition of mergers shifts from focused to diversifying and back with changes in external market conditions. Our evidence is broadly consistent with the notion that firms diversify their scope in response to tightening in external capital markets.

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Section: Introductionmentioning

confidence: 54%

Financial market frictions and diversification

Matvos

Seru

Silva

2018

Journal of Financial Economics

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“…We indeed show in Supplemental Appendix H.5 that wage differences across locations among plants within the same multi‐plant firm are smaller than wage differences among all plants across those locations. See Silva (2020) for further evidence of fairness norms in multi‐plant firms and Hjort, Li, and Sarsons (2020) for further evidence of firm‐wide wage setting procedures.…”

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confidence: 99%

Micro Data and Macro Technology

Oberfield

Raval

2021

ECTA

180

105

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We develop a framework to estimate the aggregate capital‐labor elasticity of substitution by aggregating the actions of individual plants. The aggregate elasticity reflects substitution within plants and reallocation across plants; the extent of heterogeneity in capital intensities determines their relative importance. We use micro data on the cross‐section of plants to build up to the aggregate elasticity at a point in time. Interpreting our econometric estimates through the lens of several different models, we find that the aggregate elasticity for the U.S. manufacturing sector is in the range of 0.5–0.7, and has declined slightly since 1970. We use our estimates to measure the bias of technical change and assess the decline in labor's share of income in the U.S. manufacturing sector. Mechanisms that rely on changes in the relative supply of factors, such as an acceleration of capital accumulation, cannot account for the decline.

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“…Our paper also contributes to the literature on the internal labor markets of conglomerates with fully-owned subsidiaries or plants (Giroud and Mueller 2015;Tate and Yang 2015;Silva 2017). Although similar mechanisms apply to both conglomerates and business groups, a key difference is that worker flows are within a firm in conglomerates and between firms in business groups.…”

Section: Introductionmentioning

confidence: 90%

The internal labor markets of business groups

Huneeus¹,

Larraín

et al. 2021

Journal of Corporate Finance

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This paper provides novel micro evidence of labor mobility inside business groups. We show that worker flows between group firms are significantly more prevalent than between unaffiliated firms. We also find that groups respond to changing business conditions by reallocating top-occupation workers across affiliated firms. The wages of top workers increase as they move within the group. Internal labor reallocation is stronger when the worker's origin firm controls the destination firm and in more complex hierarchical structures. Our results are consistent with the hypothesis that groups ease the transfer of intangible inputs, such as management practices, across firms.

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Internal Labor Markets, Wage Convergence, and Investment

Cited by 19 publications

References 84 publications

Financial market frictions and diversification

Financial market frictions and diversification

Micro Data and Macro Technology

The internal labor markets of business groups

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