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Market Power, Dismissal Threat, and Rent Sharing: the Role of Insider and Outsider Forces in Wage Bargaining

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Author Info

  • Anabela Carneiro

    () (CETE, Faculdade de Economia, Universidade do Porto)

  • Pedro Portugal

    () (Banco de Portugal and Universidade Nova de Lisboa)

Abstract

This study investigates wage determination at the firm level using a longitudinal panel of large firms in Portugal. The results revealed that insider forces such as revenue per employee and market share have a significant impact on wage determination. The results also showed that insider-outsider considerations seem to be empirically relevant in Portugal. That is, firms where insider workers seem to have more market power tend to pay higher wages. More specifically, in firms with low layoff rates, high proportion of permanent employees and high rates of labour utilization workers seem to be in a better position to extract rents in the form of higher wages.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0403.

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Length: 23 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:por:cetedp:0403

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Related research

Keywords: wages; market power; dismissal threat; rent sharing; instrumental variables;

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References

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  1. Harry J. Holzer & Edward B. Montgomery, 1990. "Asymmetries and Rigidities in Wage Adjustments by Firms," NBER Working Papers 3274, National Bureau of Economic Research, Inc.
  2. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  4. 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.
  5. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
  6. Lindbeck, Assar & Snower, Dennis J, 1985. "Explanations of Unemployment," Oxford Review of Economic Policy, Oxford University Press, vol. 1(2), pages 34-59, Summer.
  7. Nickell, S. & Wadhwani, S., 1989. "Insider Forces And Wage Determination," Papers 334, London School of Economics - Centre for Labour Economics.
  8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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  10. Blanchflower, D., 1989. "Fear, Unemployment And Pay Flexibility," Papers 344, London School of Economics - Centre for Labour Economics.
  11. Dolado, Juan José & Bentolila, Samuel, 1994. "Labour Flexibility and Wages : lessons from Spain," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/3309, Universidad Carlos III de Madrid.
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  13. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  14. Nickell, Stephen & Kong, Paul, 1992. "An investigation into the power of insiders in wage determination," European Economic Review, Elsevier, vol. 36(8), pages 1573-1599, December.
  15. John M. Abowd & Thomas Lemieux, 1991. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," NBER Working Papers 3808, National Bureau of Economic Research, Inc.
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  17. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, September.
  18. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
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  20. Wulfsberg, F., 1995. "An Application of Wage Bargaining Models to Norwegian Panel Data," Memorandum 29/1995, Oslo University, Department of Economics.
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  25. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-88, March.
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  29. repec:iza:izadps:dp534 is not listed on IDEAS
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Citations

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Cited by:
  1. Natália P. Monteiro & Miguel Portela & Odd Rune Straume, 2010. "Firm ownership and rent sharing," NIPE Working Papers 13/2010, NIPE - Universidade do Minho.
  2. Sónia Torres & Pedro Portugal & John T. Addison & Paulo Guimarães, 2010. "The Sources of Wage Variation: An Analysis Using Matched Employer-Employee Data," Working Papers w201025, Banco de Portugal, Economics and Research Department.
  3. Pedro Portugal, 2006. "Wage Setting in the Portuguese Labor Market: A Microeconomic Approach," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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