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Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data

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  • Arai, Mahmood

    ()
    (Dept. of Economics, Stockholm University)

Abstract

In this paper I use data on workers matched whit firms balance-sheet reports to examine the relation between wages and firms´ ability to pay. Results indicate that experienced and highly educated workers are sorted into profitable firms. Wages are significantly correlated to profits and capital-labor ratio, after controlling for workers quality (observed characteristics as well as time-invariant individual effects), job characteristics, local unemployment, firms´ employment history and employer size. These are mainly within industry effects attributed to wage determination at the firm-level. The conclusion is that previous studies based on industry data substantially underestimate the impacts of profits on wages.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 1999:3.

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Length: 27 pages
Date of creation: 30 Apr 1999
Date of revision:
Handle: RePEc:hhs:sunrpe:1999_0003

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Keywords: wages; profits; capital intensity; rent-sharing;

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  1. David G. Blanchflower & Andrew J. Oswald & Mario D. Garrett, 1989. "Insider Power in Wage Determination," NBER Working Papers 3179, National Bureau of Economic Research, Inc.
  2. Stephen Nickell & D Nicolitsas, 1994. "Wages," CEP Discussion Papers dp0219, Centre for Economic Performance, LSE.
  3. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  6. Abowd, John M & Lemieux, Thomas, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 983-1014, November.
  7. Edin, P-A. & Zetterberg, J., 1989. "Inter-Industry Wage Differntials: Evidence From Sweden And A Comparison Withthe United States," Papers 1989f, Uppsala - Working Paper Series.
  8. Forslund, Anders, 1994. "Wage Setting at the Firm Level--Insider versus Outsider Forces," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 245-61, April.
  9. Andrew K.G. Hildreth and Andrew J. Oswald, . "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Economics Discussion Papers 425, University of Essex, Department of Economics.
  10. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  11. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  12. Edin, P.A. & Holmlund, B. & Ostros, T., 1992. "Wage Behavior and Labor Market Programs in Sweden: Evidence from Micro Data," Papers 1993-1, Uppsala - Working Paper Series.
  13. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  14. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  15. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December.
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