Concentrated Ownership and Labor Relations∗

We show that differences in the quality of labor relations across countries can help to explain cross-country differences in ownership concentration. Controlling for minority shareholder protection, countries in which labor relations are hostile tend to have more concentrated ownership than countries in which labor relations are cooperative. Union strength, labor regulation, and the political orientation of countries, on the other hand, appear not to matter for ownership concentration. Based on Crouch’s (1993) argument that cross-country differences in the quality of labor relations can be attributed to the presence or absence of state-church conflicts in the 19th century, which in turn can be attributed to a country’s religious affiliation, we instrument labor relations using religion in 1900. The IV regressions confirm our basic results. We also find similar results when we use strike data from the 1960s to explain differences in ownership concentration across countries, and when we examine postwar Canadian and Italian time series data, which show a remarkably strong correlation between strike activity and changes in ownership concentration over time. ∗We thank Randall Morck, Michael Percy, Gloria Tian, Bernard Yeung, Pierre Fortin, and Paolo Volpin for kindly providing us with their data. For helpful comments and suggestions, we thank Raj Aggarwal, Lucian Bebchuk, Andrew Clark, Oliver Hart, Fausto Panunzi, Paola Sapienza, Antoinette Schoar, Andrei Shleifer, Jeremy Stein, Guido Tabellini, Jeff Wurgler, and seminar participants and Harvard, Kellogg, Minnesota, USC, Bocconi, and DELTA-PSE. †New York University and CEPR. Email: [email protected]. ‡New York University, NBER, and CEPR. Email: [email protected].