Ownership networks and labor income

Abstract

Abstract We document a novel relationship between networks of firms linked through ownership (i.e., business groups) and labor income using matched employer–employee data for Chile. Business group affiliation is associated with higher wages, even after controlling for firm size and individual worker effects. The group premium is stronger for top workers; hence, group firms have higher wage dispersion. The premium remains present when comparing group firms and matched stand-alone firms, and in within-firm comparisons using transitions in and out of groups. Our results are consistent with workers reaching higher productivity and wages by leveraging their skills on the group’s organizational structure (JEL G32, J31).