Concentrated Ownership and Labour Relations

Political struggles between the emerging European liberal states and the Catholic church in the 18th and 19th centuries provoked the formation of highly oppositional labour movements, resulting in Catholic countries having conflictual labour relations until the present. Based on the premise that differences in the quality of labor relations across countries are, at least partly, the outcome of historical and cultural developments, we examine whether these differences have implications for the prevalence of family ownership. Controlling for differences in minority shareholder protection, we find that countries with hostile labour relations have significantly more concentrated ownership than countries with cooperative labour relations. This relationship is strikingly robust and holds even when we instrument our survey measure of the quality of labour relations using either the fraction of Catholics or Protestants 1900. It also holds when we replace our survey measure of the quality of labour relations with actual strike data from the 1960s. As it turns out, differences in strike activity in the 1960s across Western countries can predict differences in ownership concentration thirty years later. Finally, the relationship also holds for Canadian time-series data, for which we document a markedly strong correlation between strike activity and changes in ownership concentration during the second half of the 20th century.