Essays on the Determinants of Employment and Wages

Abstract

What determines the employment and wage levels paid by firms? While a long literature focuses on standard supply and demand factors as the key determinant, this dissertation consists of three chapters in which institutional factors and market or firm characteristics play a key role in determining labor-market outcomes. A central theme throughout is that in the presence of imperfections in the labor market, changes to the institutional framework or market environment can have large impacts on workers.

The first chapter studies whether labor market concentration impacts workers' outcomes. To study this question, I utilize a large sample of mergers and acquisitions in the United States between the years 1999-2009 to estimate the causal effect of local labor market concentration on labor-market outcomes. I find that mergers generating significant shifts in labor market concentration result in market-level declines in earnings. While antitrust authorities have historically focused on product-market competition, the results suggest that the largest mergers may warrant antitrust scrutiny based on labor market power alone.

The second chapter studies how privatization of state-owned enterprises impacts the labor market. While privatization remains a popular policy tool in many countries, workers and trade unions often fear it will reduce wages and employment. In this chapter, I study a privatization program that occurred in Brazil during the 1990s. I find that earnings for privatized workers firms fall substantially after privatization. Additionally, wages fall at private-sector firms connected to privatized firms by labor mobility.

The third chapter, co-authored with Joshua Bernstein, combines quasi-experimental evidence with a structural model of the labor market to identify the aggregate effect of employment protection legislation (EPL) on unemployment and output. In particular, we exploit the tenure-dependence built into EPL in Brazil (EPL only applies to jobs that last three months) to identify its effect on the hazard rate of job termination. We then map this effect to general equilibrium outcomes through a structural model of the labor market. We find that EPL in Brazil leads to a significant drop in aggregate output through an increase in the unemployment rate.