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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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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. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, Elsevier, vol. 108(C), pages 169-183.
  2. Kerr, Andrew & Teal, Francis J., 2012. "The Determinants of Earnings Inequalities: Panel Data Evidence from South Africa," IZA Discussion Papers 6534, Institute for the Study of Labor (IZA).
  3. Ayalew Ali, Daniel & Goldstein, Markus, 2011. "Environmental and Gender Impacts of Land Tenure Regularization in Africa," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. repec:ldr:wpaper:92 is not listed on IDEAS
  5. 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.
  6. Deon Filmer & Louise Fox, 2014. "Youth Employment in Sub-Saharan Africa," World Bank Publications, The World Bank, number 16608, August.
  7. Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2013. "Job Creation and Destruction in South Africa," SALDRU Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town 092, Southern Africa Labour and Development Research Unit, University of Cape Town.
  8. 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.
  9. Magruder, Jeremy R., 2013. "Can minimum wages cause a big push? Evidence from Indonesia," Journal of Development Economics, Elsevier, Elsevier, vol. 100(1), pages 48-62.
  10. 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.
  11. Godlonton, Susan, 2014. "Employment risk and job-seeker performance:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1332, International Food Policy Research Institute (IFPRI).
  12. Jeremy R. Magruder, 2010. "Intergenerational Networks, Unemployment, and Persistent Inequality in South Africa," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 2(1), pages 62-85, January.
  13. 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.

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