Efficiency Wage and Labor Discipline Models: Matched-Panel Evidence from Brazilian Construction Industry

The aim of this paper is to test the relationship between wage and workers’ labor effort for the Brazilian construction industry. This relationship is stated by both the shirking and the labor discipline versions of efficiency wage models. Actually workers’ labor effort is neither verifiable nor available for empirical tests, so the most of the empirical tests for this theory are performed by testing the trade-off between wages and supervision, and the trade-off between wages and the workers’ probability of termination. This paper provides empirical tests for both relationships, and the efficiency wage model hypothesis is empirically supported by this paper.Efficiency Wage Models, Cross-sectional Models, Panel Data Models, Matched Employer-Employee Data

A Note on Gibrat's Law, Gibrat''s Legacy and Firm Growth: Evidence from Brazilian Companies

The aim of this work is to test the Gibrat's Law hypothesis for Brazilian firms. Gibrat''s Law establishes that firm growth is a random walk, it means that the probability of a given proportionale change in size during a specified period is the same for all firms in a given industry. This work uses information from manufacturing and services sectors, and it uses two different variables to compute firm growth: The growth of employment and the growth of value added. Gibrat''s Law was rejected for the complete sample of manufacturing and services firms - the smaller companies grow at larger rates. On the other hand, Gibrat''s Law is supported in both sectors when a subsample of large and well-established companies is used (Gibrat''s Legacy). These results corroborate the recent stylized facts of the literature.Firm Growth

Risk of Firm Closure and Wages in Brazil: Compensating Wage Dierentials or Bargaining Concessions?

The economic theory proposes two hypotheses for the relationship between wages and risk of job loss due to rm (or plant) closure. The rst hypothesis posits that workers at greater risk should be compensated by higher wages. This is known as the theory of compensating wage diferentials. The second hypothesis states that workers at rms with a greater risk of closure would be willing to exchange higher wages for longer-term stability in the job. This is known as the theory of bargaining concessions. There is a paucity of empirical studies on this issue, and the results have been inconsistent. The aim of this paper is to provide evidence for the Brazilian manufacturing industry. To accomplish that, diferent risk measures, diferent databases, and dierent econometric methods are used. All the tests performed in this study conrm the theory of compensating wage diferentials.exit; bankruptcy; severance payments; insolvency; wage determination

Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data

Theory and evidence are ambiguous about the effect of within-firm wage inequality on firm performance. This paper tests empirically this relationship drawing on detailed Brazilian matched employer-employee panel data, considering alternative measures of inequality and performance and different estimation methods. We find overwhelming evidence of a positive relationship between wage dispersion and firm performance when using cross-section analysis, especially in manufacturing. However, this relationship is weakened when controlling for firm time-invariant heterogeneity.Tournaments, Incentives, Equity, Wage Dispersion

Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers

How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.ownership changes, foreign direct investment, worker mobility

Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers

How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.Foreign Direct Investment, Ownership Changes, Worker Mobility

Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil

We provide evidence about the determinants of the wage structures of developing countries by examining the case of Brazil. Our specific question is whether Brazil's dramatic income and wage differentials can be explained by the division of rents between firms and their employees, unlike in competitive labour markets. Using detailed individual-level matched panel data, covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002, we consider the endogeneity of profits, by adopting different measures of rents and different instruments and by controlling for spell fxed effects. Our results, robust to different specifications and tests, indicate no evidence of rent sharing. This conclusion contrasts with findings for most developed countries, even those with flexible labour markets. Possible explanations for the lack of rent sharing include the weakness of labour-market institutions, the high levels of worker turnover and the macroeconomic instability faced by the country.Wage Bargaining, Instrumental Variables, Matched Employer-Employee Data, Developing Countries

Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers

How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.foreign direct investment; ownership changes; worker mobility