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The employment effects of mergers in a declining industry: the case of South African gold mining

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Alberto Behar
James Hodge

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Abstract

An industry in decline provides an appropriate setting for the theory that mergers and acquisitions destroy implicit contracts and allow for the shedding of excess labour. We test this theory using provincial data from the South African gold mining industry, which has been in decline over the last two decades. Our data clearly portray rises in real wages and falling employment after the end of apartheid and our econometric results are remarkably consistent with standard labour demand theory. We find evidence of a significant negative effect of mergers/acquisitions on employment of a magnitude similar to that found for Continental Europe. This supports the view that negative employment effects are more likely in rigid labour markets.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 335.

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Date of creation: 2007
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Handle: RePEc:oxf:wpaper:335

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Related research
Keywords: Labour Demand; Mergers; Gold Industry;

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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  4. Lichtenberg, Frank R & Siegel, Donald, 1990. "The Effect of Ownership Changes on the Employment and Wages of Central Office and Other Personnel," Journal of Law & Economics, University of Chicago Press, vol. 33(2), pages 383-408, October.
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  6. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  7. Gugler, Klaus & Yurtoglu, B. Burcin, 2004. "The effects of mergers on company employment in the USA and Europe," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 481-502, April. [Downloadable!] (restricted)
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  9. Taylor, Mark P. & Sarno, Lucio, 1998. "The behavior of real exchange rates during the post-Bretton Woods period," Journal of International Economics, Elsevier, vol. 46(2), pages 281-312, December. [Downloadable!] (restricted)
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  10. Severin Borenstein & Joseph Farrell, 1999. "Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry," NBER Working Papers 7075, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
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