I document wage convergence in conglomerates using detailed plant-level data: Workers in low-wage industries collect higher-than-industry wages when the diversified firm also operates in high-wage industries. I confirm this effect by exploiting the implementation of the North American Free Trade Agreement (NAFTA) and changes in minimum wages at the state level as sources of exogenous increases in wages in some plants. I then track the evolution of wages of the remaining workers of the firm, relative to workers of unaffiliated plants. Plants where workers collect higher-than-industry wages operate with higher capital intensity, suggesting that internal labor markets may affect investment decisions in internal capital markets.
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Assistant Professor, Nova SBEWebsite
Fahiz Baba-Yara started his PhD journey in Economics and Finance in 2015. His research focus on finance, specifically how machine learning models help us make better this decision and how we can improve the forecasting ability of these machine learning models. Fahiz is now heading forward to Indiana University as Assistant Professor from next semester.Learn more
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