High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa
- (pp. 138-66)
Abstract
South Africa has very high unemployment, yet few adults work informally in small firms. This paper tests whether centralized bargaining, by which unionized large firms extend arbitration agreements to nonunionized smaller firms, contributes to this problem. While local labor market characteristics influence the location of these agreements, their coverage is spatially discontinuous, allowing identification by spatial regression discontinuity. Centralized bargaining agreements are found to decrease employment in an industry by 8-13 percent, with losses concentrated among small firms. These effects are not explained by resettlement to uncovered areas, and are robust to a wide variety of controls for unobserved heterogeneity. (JEL J52, K31, L25, O14, O15)Citation
Magruder, Jeremy R. 2012. "High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa." American Economic Journal: Applied Economics, 4 (3): 138-66. DOI: 10.1257/app.4.3.138Additional Materials
JEL Classification
- J52 Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
- K31 Labor Law
- L25 Firm Performance: Size, Diversification, and Scope
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
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