Rent Sharing, Investment, and Collective Bargaining: Evidence from Employee‐Level Data in Vietnam

Previous studies on collective bargaining have largely been conducted in developed countries where trade unions are relatively independent from employers and government and have the necessary capacity for bargaining. In the absence of market institutions that support trade unions' independence and capacity to bargain, the role of trade unions could be different. Using employee‐level data with firm's characteristics, we examine for the first time the relationship between collective bargaining and rent sharing in Vietnamese small and medium‐sized enterprises. While the results show a direct monitoring effect of trade unions on wages, and some degree of rent sharing with firms' past performance, trade unions play a limited bargaining role of this kind. There is also a causal negative moderating effect of collective bargaining on employees' earnings in firms having investment activities. For long‐term employment security, unionized employees appear to share the risk by accepting lower wages in firms with investment activities.