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Essays on Labor Demand with Market Imperfections


My first chapter examines whether tacit collusion occurs in the market for BigLaw associates. Many large firms across the U.S. offer the exact same associate salaries despite substantial heterogeneity on both sides of the labor market. I show that empirical market dynamics are difficult to reconcile with competitive labor markets. I then provide evidence for an alternative explanation -- tacit collusion. A few firms act as price leaders and set maximum salaries. Some smaller firms are excluded from punishment to maintain cartel stability, and firms strategically communicate compensation decisions to align on decisions. Tacit collusion is facilitated by communication and standardization. Many of these practices originated in historical explicit collusion. This research highlights the potential for collusion in labor markets and the need for further scrutiny of other markets.

My second chapter is joint work with Anna Aizer, Adriana Lleras-Muney, and Jonathan Vogel, and we study the role of WWII in reducing occupational discrimination against Black men. The 1940s witnessed substantial reductions in the Black-white earnings gap. We show that domestic WWII defense production played an important role. In labor markets with more war production contracts, Black workers were more likely to be upgraded into skilled occupations and receive higher wages. War spending also led to an increase in the high school graduation rate of Black children, suggesting important inter-generational spillovers. These results are attributable to the interaction between tight labor markets and federal prohibition against discrimination for war contractors. Using a structural model, we show that WWII defense production generated substantial improvements in national labor-market outcomes by decreasing discrimination for Black workers.

My third chapter looks at how firm acquisitions affect working conditions. I focus on acquisitions in a narrowly defined industry, nursing homes, to allow direct comparison across acquisitions and working conditions. I find that focusing only on the limited average effect on wages would miss more significant effects on benefits (6% decrease) and on workload (3-4% increase). Most importantly, working conditions in the acquired facility quickly converge towards those of the acquiring firm. This dynamic creates substantial heterogeneity in the effect of acquisitions on acquired facilities based on working conditions relative to the acquirer. Finally, I provide suggestive evidence that firm behavioral factors (e.g., managerial inertia) play an important role in the standardization of working conditions.

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