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Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil

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  • Pedro S. Martins
  • Luiz A. Esteves

Abstract

We provide evidence about the determinants of the wage structures of developing countries by examining the case of Brazil. Our specific question is whether Brazil's dramatic income and wage differentials can be explained by the division of rents between firms and their employees, unlike in competitive labour markets. Using detailed individual-level matched panel data, covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002, we consider the endogeneity of profits, by adopting different measures of rents and different instruments and by controlling for spell fxed effects. Our results, robust to different specifications and tests, indicate no evidence of rent sharing. This conclusion contrasts with findings for most developed countries, even those with flexible labour markets. Possible explanations for the lack of rent sharing include the weakness of labour-market institutions, the high levels of worker turnover and the macroeconomic instability faced by the country.

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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 14.

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Date of creation: Jun 2008
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Handle: RePEc:cgs:wpaper:14

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Keywords: Wage Bargaining; Instrumental Variables; Matched Employer-Employee Data; Developing Countries;

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Citations

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Cited by:
  1. Pedro S. Martins & Luiz A. Esteves, 2012. "Wages and Profits in Manufacturing Firms: Matched-Panel Evidence from Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(3b), pages 815_841.
  2. Pedro S. Martins & Luiz A. Esteves, 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," Working Papers 15, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  3. Lionel Fontagné & Michela Limardi, 2011. "The Outcome of NGOs' Activism in Developing Countries under Visibility Constraint," PSE Working Papers halshs-00630096, HAL.
  4. Pedro Martins & Luiz Alberto Esteves, 2007. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil," Working Papers 0060, Universidade Federal do Paraná, Department of Economics.
  5. Michela Limardi, 2011. "The Ambiguous Outcome of NGOs’ Activism in Developing Countries," ERSA conference papers ersa11p555, European Regional Science Association.
  6. Lionel Fontagné & Michela Limardi, 2011. "The Outcome of NGOs' Activism in Developing Countries under Visibility Constraint," Working Papers halshs-00630096, HAL.
  7. Luiz A. Esteves & Pedro S. Martins, 2008. "Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data," Working Papers 16, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

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