Rent Seeking at Plant Level: An Application of the Card-De la Rica Tenure Model to Workers in German Works Councils
AbstractLow-skilled workers enjoy a large wage advantage in German works council establishments. Since job tenure is also longer for these workers, one explanation might be rent-seeking. If the premium is a compensating wage differential (or a return to unmeasured ability), it should not lead to higher tenure; whereas if it is (partly) rent, lower quits should lead to longer tenure at plants with works councils. Our analysis uses the Card and de la Rica (2006) tenure model, and although the association between skill level and the works council tenure gap is positive it fails to achieve statistical significance in a single equation framework. However, running the tenure equation for separate skill quintiles, we find that those with the highest wage premium have the greatest tenure. As a result, although we cannot be certain that the works council wage mark-up of low-skilled workers is necessarily a non competitive rent, the observed pattern of job tenure across different skill subsamples is not after all inconsistent with rent-seeking behavior.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 12_09.
Date of creation: Jan 2009
Date of revision:
Other versions of this item:
- John T. Addison & Paulino Teixeira & Thomas Zwick, 2009. "Rent Seeking at Plant Level: An Application of the Card-de la Rica Tenure Model to Workers in German Works Councils," GEMF Working Papers 2009-04, GEMF - Faculdade de Economia, Universidade de Coimbra.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
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- Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
- John T. Addison & Paulino Teixeira & Thomas Zwick, 2007.
"German Works Councils and The Anatomy of Wages,"
Working Paper Series
13-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
- David Card & Sara de la Rica, 2006. "Firm-level contracting and the structure of wages in Spain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(4), pages 573-592, July.
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