december, 2018

04dec12:00 pm1:15 pmFederico HuneeusThe Internal Labor Markets of Business GroupsEvent:Student Research Workshop

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Event Details

Business groups (BGs) can be beneficial for affiliated firms through the formation of internal markets that improve the allocation of their resources. Although shown for internal capital markets, little is known about BGs’ internal labor markets (ILM). We provide micro evidence that business groups use and benefit from ILM. Consistent with ILM, labor reallocation in response to international trade shocks is stronger between pairs of firms in business groups than between pairs of unaffiliated firms. This internal reallocation only holds among top-occupation employees. We test several hypotheses from the literature of the reasons behind these ILM and fail to find support for diversification, insurance for workers, transaction costs, and imperfect information. Instead, we find that flows within ILM are stronger when the employee’s origin firm controls the destination firm, and in more complex ownership structures. Finally, we provide suggestive evidence that reallocation within ILM increases the destination firm’s profitability and is beneficial for the group as a whole. Our results are consistent with the idea that ownership networks between firms facilitates the accumulation and transfer of intangible inputs such as management practices.

 

Time

(Tuesday) 12:00 pm - 1:15 pm

Location

Bendheim Center for Finance Room 101

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