Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324778 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1681
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
We test whether firms react to changes in the wages and size of their competitors. We use a unique institutional feature of public procurement auctions in Brazil: the moment in which the auction ends is random. For close auctions, winner and runner-up are as good as randomly assigned. We first show that firm-specific demand shocks lead to increases in the size and wages of the firm receiving the shock. Then, we document that these firm-specific demand shocks lead to increased wages of other (competing) firms in the same local labor market. We do not find negative effects on competitors' firm size. The effects are driven by competing firms responding to demand shocks from firms with high labor market share.
Subjects: 
Wage-setting
Bargaining
Wage posting
Rent-sharing
Demand shocks
JEL: 
J01
J23
J30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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