UC San Diego

This dissertation consists of three chapters that discuss the evolution of the skill composition of the workforce in firms, as well as in municipal governments.

Chapter 1 connects firms’ demand for skilled labor to their need to invest in organizational capital, a type of intangible capital. I develop a firm dynamics model of endogenous organizational capital accumulation which I use to measure firms’ investment in organizational capital and explore the role of organizational capital in firm growth. Using Brazilian administrative data, I study the life cycle demand for skilled labor by high-performing firms in Brazil and find that the share of skilled workers in such firms decreases with age. I use this fact to discipline my model and find that high-performing firms spend 25% of their total wage bill on organizational capital investment and that the accumulation of organizational capital across the firm’s life cycle generates 28% of its total growth.

In Chapter 2, I examine what happens to the average wages as firms expand and find that as firms grow, the average wages in the firm fall. I identify that the average wage decrease is mostly due to the change in the worker composition of the firm towards a less skilled workforce. I find that the change in the composition happens mostly via firm hiring, with firms disproportionately hiring lower skilled workers as they grow.

In Chapter 3, I examine whether the overall competence level of municipal workers changes after the municipality is audited and revealed to be corrupt. I take advantage of the random audits of the municipal governments’ use of federal funds in Brazil and find that in municipalities that are revealed to be corrupt there is an increase in the overall competence level of the municipal workers following the audit. I find that the effect is mostly driven by the change in the competence level of new hires, which I interpret as evidence that the exposure of corruption serves as a temporary deterrent for future administrations to use public sector employment as a reward for their political supporters.