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Data Mining Union and Franchise Agreements

Paper Session

Friday, Jan. 3, 2025 10:15 AM - 12:15 PM (PST)

Parc 55, Mission 1
Hosted By: Labor and Employment Relations Association
  • Chair: Goncalo Costa, Harvard University

Minimum Wages and Vertical Restraints

Swayamsiddha Sarangi
,
University of Utah

Abstract

This paper utilizes a dataset linking franchise-chain-specific Franchise Disclosure Documents to employer-identified job advertisements from Burning Glass Technologies/Lightcast to analyze firm-level variation in the effect of state minimum wage increases. We adopt a stacked event-study methodology, leveraging within-chain variation in exposure to statutory wage increases due to geographic footprints overlapping treatment and control states. We find that franchise chains that utilize vertical restraints that limit the autonomy of franchisees to adjust to statutory wage increases (for example, by increasing retail prices) show a lower elasticity of the real wages they pay to increases in the statutory minimum, and a correspondingly smaller reduction in labor turnover as measured by the chain-level count of posted job vacancies.

The Balance of Power in Franchising

Marshall Steinbaum
,
University of Utah
Ulrich Atz
,
New York University
Peter Norlander
,
Loyola University Chicago
Sergio Pinto
,
University of Maryland

Abstract

The franchising business model brings the traditional economic theory of the firm into question, because economic production is legally separated from control. This paper analyzes a corpus of over 48,000 Franchise Disclosure Documents, which are legally mandated filings by franchisors (generally national or regional chains) pertaining to the terms on which they offer franchises to would-be franchisees. These documents are informative about the relative autonomy of franchisees with respect to franchisors. We find that that autonomy has decreased since 2011: the vast majority of franchisees operate under post-term noncompete clauses, do not enjoy local retail monopolies, and many are restricted in where they are allowed to operate, from whom they source their inventory, and what prices they charge consumers. These findings relate to longstanding questions about where to draw the boundary of the firm, opening the 'black box' of firm-specific pay-setting, and the competitive effect of vertical restraints.

Voluntary Disclosures and Investor Naïveté: Evidence from Franchising

Ulrich Atz
,
New York University

Abstract

This study investigates voluntary financial performance disclosures, how they evolved, and how they associate with business closure rates. The U.S. franchise market is a setting where many franchise buyers are relatively unsophisticated because they resemble consumers with limited business experience. Using a new dataset of more than 15,000 franchise disclosure documents, I document that the share of franchise sellers that voluntarily disclose financial performance has tripled to 78% since the 1990s. While the quantity of disclosures has increased, the informativeness has declined, with fewer disclosures now including both sales and profits. Counterintuitively, quantity alone does not seem to lower buyers' business closure rates, and they increase in a difference-in-differences regression based on a change in performance disclosure guidance. I interpret this and further evidence in favor of the theory of investor naïveté: some unsophisticated investors treat increased voluntary disclosures overly optimistically. I support my findings with a survey among franchise buyers.

Greening the Workplace: Climate Action Through Collective Bargaining Agreements

Michael Thorburn
,
Stanford University

Abstract

The urgency of climate change demands multifaceted approaches, integrating innovation, policy, and localized institutional engagement. One such institution, organized labor, traditionally wary of climate sustainability policies due to concerns over job loss, is increasingly embracing the transition to greener economies. This shift is evidenced by the incorporation of environmentally focused terms into collective bargaining agreements, aimed at mitigating climate change impacts within workplaces. These "green" collective agreements, a relatively understudied aspect of labor law and industrial relations, encompass clauses governing environmental considerations such as workplace sustainability, production efficiency, and climate-related retraining standards. Despite being a prevalent phenomenon, particularly in Canada, green clauses remain largely unexplored within North America. Bridging this gap, this study employs supervised machine learning techniques to analyze a vast corpus of over 40,000 collective agreements, providing a comprehensive overview of green clause adoption across different jurisdictions and industries over time. By offering refined categorization of green clauses, this research advances understanding in labor law and corporate governance while highlighting the potential of organized workplaces in addressing climate change. Moreover, this study not only contributes to a global discourse on the role of the workplace in combating climate crisis but also furnishes actionable insights for policymakers, unions, and management to navigate the complexities of transitioning toward environmentally sustainable practices. Through this interdisciplinary approach, the study underscores the imperative of collective action in tackling one of the most pressing challenges of our era.
JEL Classifications
  • J4 - Particular Labor Markets