Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms
AbstractThis paper presents a model for estimating both the magnitude of price-cost margins and the extent of rent sharing. The model generalizes Robert Hall's model, relating the conventional measure of total factor productivity (the "Solow residual") to the degree of imperfect competition in product markets, by also allowing for the possibility of imperfect labor markets. It does so by assuming that the firm wages and level of employment are jointly determined according to an efficient bargaining scheme between the firm and its workers. One attractive aspect of Hall's framework is that it does not require a measure of the user cost of capital to assess the magnitude of markups, in contrast to more conventional analyses. Similarly, another interesting feature of our extended framework is that it does not require a measure of the alternative external wage to estimate the degree of workers' bargaining power, contrary to most studies on rent sharing. Our model is estimated on a panel of French manufacturing firms using the Generalized Method of Moments (GMM). We find that the lack of explicit consideration of labor market imperfection results in a large underestimation of the firm true markup, corresponding to the omission of the part of the firm rent captured by workers. Our estimate of average rent sharing is about 0.6, while our estimate of average price-cost margins is of an order of magnitude of 1.4, to be compared to 1.1 only, if rent sharing is ignored.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by ENSAE in its journal Annals of Economics and Statistics.
Volume (Year): (2005)
Issue (Month): 79-80 ()
Other versions of this item:
- Bruno Crépon & Rozen Desplatz & Jacques Mairesse, 2010. "Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms," NBER Chapters, National Bureau of Economic Research, Inc, in: Contributions in Memory of Zvi Griliches, pages 583-610 National Bureau of Economic Research, Inc.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Gary-Bobo).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.