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

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Author Info
Pedro S. Martins () (Queen Mary, University of London, CEG-IST Lisbon and IZA Bonn)
Luiz A. Esteves () (Universidade Federal do Paraná and Università di Siena)

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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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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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Related research
Keywords: wage bargaining; instrumental variables; matched employer-employee data; developing countries;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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References listed on IDEAS
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  7. Naércio Aquino Menezes-Filho & Marc-Andreas Muendler & Garey Ramey, 2008. "The Structure of Worker Compensation in Brazil, with a Comparison to France and the United States," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 324-346, 04. [Downloadable!] (restricted)
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  19. Pedro S. Martins & Luiz A. Esteves, 2006. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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). [Downloadable!]
    Other versions:
  2. Armando João Dalla Costa, 2005. "Sucessão E Sucesso Nas Empresas Familiares," Working Papers 0017, Universidade Federal do Paraná, Department of Economics. [Downloadable!]
  3. 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. [Downloadable!]
  4. Anna Karolina Selhorst Bezerra & Luciano Nakabashi, 2008. "O Programa Comunidade Escola e seus impactos sobre a violência entre Crianças e Jovens," Working Papers 0076, Universidade Federal do Paraná, Department of Economics. [Downloadable!]
  5. Pedro S. Martins & Luiz A. Esteves, 2008. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," Working Papers 14, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
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