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High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa

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  • Jeremy R. Magruder

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)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/app.4.3.138
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 4 (2012)
Issue (Month): 3 (July)
Pages: 138-66

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Handle: RePEc:aea:aejapp:v:4:y:2012:i:3:p:138-66

Note: DOI: 10.1257/app.4.3.138
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Cited by:
  1. Jeremy R. Magruder, 2010. "Intergenerational Networks, Unemployment, and Persistent Inequality in South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 2(1), pages 62-85, January.
  2. Ali, Daniel Ayalew & Deininger, Klaus & Goldstein, Markus, 2011. "Environmental and gender impacts of land tenure regularization in Africa : pilot evidence from Rwanda," Policy Research Working Paper Series 5765, The World Bank.
  3. Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2013. "Job Creation and Destruction in South Africa," SALDRU Working Papers 92, Southern Africa Labour and Development Research Unit, University of Cape Town.
  4. Magruder, Jeremy R., 2013. "Can minimum wages cause a big push? Evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 100(1), pages 48-62.
  5. Ayalew Ali, Daniel & Goldstein, Markus, 2011. "Environmental and Gender Impacts of Land Tenure Regularization in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. PF Blaauw & WF Krugell, 2012. "Micro-evidence on day labourers and the thickness of labour markets in South Africa," Working Papers 282, Economic Research Southern Africa.
  7. Matthew Collin, 2013. "Tribe or title? Ethnic enclaves and the demand for formal land tenure in a Tanzanian slum," CSAE Working Paper Series 2013-12, Centre for the Study of African Economies, University of Oxford.
  8. James A. Levinsohn & Todd Pugatch, 2011. "Prospective Analysis of a Wage Subsidy for Cape Town Youth," NBER Working Papers 17248, National Bureau of Economic Research, Inc.
  9. Cai, Hongbin & Wang, Miaojun & Yan, Se, 2014. "Why Do Large Firms Willingly Pay High Wages in Developing Countries?," MPRA Paper 53538, University Library of Munich, Germany.
  10. Francis Teal & Andrew Kerr, 2012. "The Determinants of Earnings Inequalities: Panel data evidence from South Africa," Economics Series Working Papers WPS/2012-04, University of Oxford, Department of Economics.

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