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Rent Sharing Before and After the Wage Bill

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  • Pedro S. Martins

Abstract

Many biases plague the analysis of whether employers share rents with their employees, unlike what is predicted by the competitive labour market model. Using a Portuguese matched employer-employee panel, these biases are addressed here in three complementary ways: 1) Controlling directly for the fact that firms that share more rents will, ceteris paribus, have lower net-of-wages profits. 2) Instrumenting profits via interactions between the exchange rate and the share of exports in firms’ total sales. 3) Considering firm or firm/worker spell fixed effects and highlighting the role of downward wage rigidity. These approaches clarify conflicting findings in the literature and result, in our preferred specifications, in significant evidence of rent sharing (a Lester range of pay dispersion of 56%), also shown to be robust to a number of competitive interpretations.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research in its series Working Papers with number 12.

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Date of creation: May 2008
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Handle: RePEc:cgs:wpaper:12

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Keywords: Rent Sharing; Instrumental Variables; Matched Employer-Employee Data; Fixed Effects.;

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  22. Marcello Estevao & Stacey Tevlin, 2003. "Do Firms Share their Success with Workers? The Response of Wages to Product Market Conditions," Economica, London School of Economics and Political Science, vol. 70(280), pages 597-617, November.
  23. John M. Abowd & Thomas Lemieux, 1991. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," NBER Working Papers 3808, National Bureau of Economic Research, Inc.
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  1. Some economics of payroll taxes
    by Pedro S. Martins in The Portuguese Economy on 2011-05-16 14:54:00
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