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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

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: 01 Jul 2007
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Handle: RePEc:oxf:wpaper:335

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Keywords: Labour Demand; Mergers; Gold Industry;

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Cited by:
  1. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers, University of Southern Denmark, Department of Environmental and Business Economics 90/09, University of Southern Denmark, Department of Environmental and Business Economics.

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