Local Labor Market Effects of Mergers and Acquisitions in Developing Countries: Evidence from Brazil

Abstract

I use matched employer-employee records merged with corporate tax information from 2003 to 2017 to estimate labor market-wide effects of mergers and acquisitions in Brazil. Labor markets are defined by pairs of commuting zone and industry sector. In the following year of a merger, market size falls by 10.8%. The employment adjustment is concentrated in merging firms. For the firms not involved in M&As, I estimate a 1.07% decline in workers earnings and a positive, although not significant, increase in their size. Most mergers have a predicted impact of zero points in concentration, measured by the Herfindahl-Hirschman Index (HHI). I spillover firms, earnings decline similarly for mergers with high and low predicted changes in HHI. Contrary to the recent literature on market concentration in developed economies, I find no evidence of oligopsonistic behavior in Brazilian labor markets.