Advanced Search
MyIDEAS: Login

Rent-Sharing and the Cyclicality of Wage Differentials

Contents:

Author Info

  • Du Caju, Philip

    ()
    (National Bank of Belgium)

  • Rycx, Francois

    ()
    (Free University of Brussels)

  • Tojerow, Ilan

    ()
    (Free University of Brussels)

Abstract

This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering all the years from 1999 to 2005. Findings show the existence of large wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. These differentials are persistent and no particular downward or upward trend is observed. However, the dispersion of inter-industry wage differentials appears to show a cyclical pattern over time. Further results indicate that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. The time dimension of our matched employer-employee data allows us to instrument firms' profitability by its lagged value. The instrumented elasticity between wages and profits is found to be quite stable over time and varies between 0.034 and 0.043. It follows that Lester's range of pay due to rent sharing fluctuates between about 24 and 37 percent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp3844.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3844.

as in new window
Length: 70 pages
Date of creation: Nov 2008
Date of revision:
Publication status: published as 'Inter-Industry Wage Differentials: How Much Does Rent Sharing Matter?' in: The Manchester School, 2011, 79 (4), 691-717
Handle: RePEc:iza:izadps:dp3844

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: industry wage differentials; rent-sharing; matched employer-employee data;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. François Rycx & Ilan Tojerow & Robert Plasman, 2004. "Rent sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/785, ULB -- Universite Libre de Bruxelles.
  2. repec:fth:inseep:2001-16 is not listed on IDEAS
  3. Iga Magda & François Rycx & Ilan Tojerow & Daphné Valsamis, 2009. "Wage differentials across sectors in Europe: an east-west comparison," Working Papers CEB 09-003.RS, ULB -- Universite Libre de Bruxelles.
  4. Brenda Gannon & Robert Plasman & Francois Rycx & Ilan Tojerow, 2007. "Inter-Industry Wage Differentials and the Gender Wage Gap: Evidence from European Countries," The Economic and Social Review, Economic and Social Studies, vol. 38(1), pages 135-155.
  5. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers.
  6. Maarten Goos & Jozef Konings, 2001. "Does Rent-Sharing Exist in Belgium ?. An Empirical Analysis Using Firm Level Data," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 65-79.
  7. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  8. Vannetelbosch, Vincent J., 1993. "Testing Between Alternative Wage-Employment Bargaining Models Using Belgian Aggreggate Data," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 27 Apr 1994.
  9. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
  10. François Rycx & Robert Plasman, 2003. "Industry wage differentials and the bargaining regime in a corporatist country," ULB Institutional Repository 2013/787, ULB -- Universite Libre de Bruxelles.
  11. Martins, Pedro S., 2004. "Industry wage premia: evidence from the wage distribution," Economics Letters, Elsevier, vol. 83(2), pages 157-163, May.
  12. Holmlund, B. & Zetterberg, J., 1989. "Insider Effects In Wage Determination: Evidence From Five Countries," Papers 1989a, Uppsala - Working Paper Series.
  13. L Christofides & A Oswald, 1991. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," CEP Discussion Papers dp0042, Centre for Economic Performance, LSE.
  14. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, November.
  15. Kahn, Lawrence M, 1998. "Collective Bargaining and the Interindustry Wage Structure: International Evidence," Economica, London School of Economics and Political Science, vol. 65(260), pages 507-34, November.
  16. Benito, Andrew, 2000. " Inter-industry Wage Differentials in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 727-46, Special I.
  17. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-37, April.
  18. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  19. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics 1999:3, Stockholm University, Department of Economics.
  20. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
  21. Margolis, D.N. & Salvanes, K.G., 2001. "Do Firms Really Share Rents with Their Workers?," Papers 11/2001, Norwegian School of Economics and Business Administration-.
  22. Björklund, Anders & Bratsberg, Bernt & Eriksson, Tor & Jäntti, Markus & Raaum, Oddbjørn, 2004. "Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries," IZA Discussion Papers 1080, Institute for the Study of Labor (IZA).
  23. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  24. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-industry wage differentials in EU countries: what do cross-country time varying data add to the picture?," MNB Working Papers 2010/9, Magyar Nemzeti Bank (the central bank of Hungary).
  25. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  26. Thierry Lallemand & François Rycx, 2009. "Are young and old workers harmful for firm productivity?," DULBEA Working Papers 09-02.RS, ULB -- Universite Libre de Bruxelles.
  27. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-76, April.
  28. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2007. "Downward wage rigidity for different workers and firms : an evaluation for Belgium using the IWFP procedure," Working Paper Research 124, National Bank of Belgium.
  29. Ali Skalli & Mahmood Araï & Gérard Ballot, 1996. "Différentiels intersectoriels de salaire et caractéristiques des employeurs en France," Économie et Statistique, Programme National Persée, vol. 299(1), pages 37-58.
  30. Giovanni Ferro-Luzzi, 1994. "Inter-Industry Wage Differentials in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 130(III), pages 421-443, September.
  31. Barth, Erling & Zweimuller, Josef, 1992. "Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S," Institute for Research on Labor and Employment, Working Paper Series qt1811h146, Institute of Industrial Relations, UC Berkeley.
  32. 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.
  33. Anne Plasman & Robert Plasman & Michael Rusinek & François Rycx, 2002. "Indicators on gender pay equality," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 45(2), pages 11-40.
  34. Maria Jepsen & Sile Padraigin O'Dorchai & Robert Plasman & François Rycx, 2005. "The wage penalty induced by part-time work: the case of Belgium," DULBEA Working Papers 05-17, ULB -- Universite Libre de Bruxelles.
  35. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Why do large firms pay higher wages? evidence from matched worker-firm data," ULB Institutional Repository 2013/8743, ULB -- Universite Libre de Bruxelles.
  36. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  37. Mead Over & Dean Jolliffe & Andrew Foster, 1996. "Huber correction for two-stage least squares estimates," Stata Technical Bulletin, StataCorp LP, vol. 5(29).
  38. Joop Hartog & Pedro Pereira & José Vieira, 2000. "Inter-industry Wage Dispersion in Portugal," Empirica, Springer, vol. 27(4), pages 353-364, December.
  39. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  40. Edin, Per-Anders & Zetterberg, Johnny, 1992. "Interindustry Wage Differentials: Evidence from Sweden and a Comparison with the United States," American Economic Review, American Economic Association, vol. 82(5), pages 1341-49, December.
  41. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-39, March.
  42. Alan Carruth & William Collier & Andy Dickerson, 2004. "Inter-industry Wage Differences and Individual Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 811-846, December.
  43. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  44. Véronique Genre & Daphne Momferatou & Gilles Mourre, 2005. "Wage diversity in the euro area - an overview of labour cost differentials across industries," Occasional Paper Series 24, European Central Bank.
  45. Maarten Goos & Jozef Konings, 2000. "Does Rent-Sharing Exist in Belgium? an Empirical Analysis Using Firm Level Data," Center for Economic Studies - Discussion papers ces0019, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  46. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
  47. Helwege, Jean, 1992. "Sectoral Shifts and Interindustry Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 55-84, January.
  48. Kevin Reilly & Luisa Zanchi, 2002. "Industry Wage Differentials: How Many, Big and Significant Are They?," Labor and Demography 0209001, EconWPA.
  49. Gürtzgen, Nicole, 2005. "Rent-sharing : Does the Bargaining Regime Make a Difference? Theory and Empirical Evidence," ZEW Discussion Papers 05-15, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  50. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Oscar Bernal Diaz & Kim Oosterlinck & Ariane Szafarz, 2008. "Observing bailout expectations during a total eclipse of the sun," Working Papers CEB 08-015.RS, ULB -- Universite Libre de Bruxelles.
  2. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers 09-03.RS, ULB -- Universite Libre de Bruxelles.
  3. Hartmut Egger & Daniel Etzel, 2009. "The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium," CESifo Working Paper Series 2895, CESifo Group Munich.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3844. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.