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

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  • Martins, Pedro S.

    ()
    (Queen Mary, University of London)

  • Esteves, Luiz A.

    ()
    (Universidade Federal do Paraná)

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 profits and different instruments and by controlling for spell fixed 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2317.

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Length: 35 pages
Date of creation: Sep 2006
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Handle: RePEc:iza:izadps:dp2317

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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. Martins, Pedro S. & Esteves, Luiz A., 2006. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA).
  2. Lionel Fontagné & Michela Limardi, 2011. "The Outcome of NGOs' Activism in Developing Countries under Visibility Constraint," PSE Working Papers halshs-00630096, HAL.
  3. Martins, Pedro S. & Esteves, Luiz A., 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," IZA Discussion Papers 3542, Institute for the Study of Labor (IZA).
  4. Cagatay Bircan, 2013. "Foreign direct investment and wages: does the level of ownership matter?," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 157, European Bank for Reconstruction and Development, Office of the Chief Economist.
  5. 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], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(3b), pages 815_841.
  6. Ghazali, Monia, 2010. "Trade liberalisation, rent sharing and wage inequality in Tunisia, 1998-2002," Economics Papers from University Paris Dauphine 123456789/5843, Paris Dauphine University.
  7. Michela Limardi, 2011. "The Ambiguous Outcome of NGOs’ Activism in Developing Countries," ERSA conference papers ersa11p555, European Regional Science Association.
  8. repec:hal:wpaper:halshs-00630096 is not listed on IDEAS
  9. Asteriou, Dimitrios & Dimelis, Sophia & Moudatsou, Argiro, 2014. "Globalization and income inequality: A panel data econometric approach for the EU27 countries," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 592-599.
  10. 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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