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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)

Suggested Citation

  • Jeremy R. Magruder, 2012. "High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 138-166, July.
    • 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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    More about this item

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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    1. High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa (American Economic Journal: Applied Economics 2012) in ReplicationWiki

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