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Do Firms Share their Success with Workers? The Response of Wages to Product Market Conditions

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  • Marcello Estevao
  • Stacey Tevlin

Abstract

We provide new evidence that industry financial conditions help determine wages in the US manufacturing sector. Ordinary least squares estimates of the effect of rents per worker on wages are significantly positive, but quite small. We show that this may stem from econometric difficulties that plague the OLS estimates. Using the US input-output tables to isolate demand shocks, we overcome these issues and identify the effects of the industry financial situation on wages. Our IV estimates reveal substantial rent sharing-much more than is consistent with a purely competitive labour market. Copyright (c) The London School of Economics and Political Science 2003.

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  • Marcello Estevao & Stacey Tevlin, 2003. "Do Firms Share their Success with Workers? The Response of Wages to Product Market Conditions," Economica, London School of Economics and Political Science, vol. 70(280), pages 597-617, November.
  • Handle: RePEc:bla:econom:v:70:y:2003:i:280:p:597-617
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    Cited by:

    1. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
    2. Maritza López Novella & Salimata Sissoko, 2013. "Understanding wage determination in a multi-level bargaining system: a panel data analysis," Empirical Economics, Springer, vol. 44(2), pages 879-897, April.
    3. Kuckulenz, Anja, 2006. "Wage and Productivity Effect of Continuing Training in Germany: A Sectoral Analysis," ZEW Discussion Papers 06-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Mahmood Arai & Fredrik Heyman, 2009. "Microdata evidence on rent-sharing," Applied Economics, Taylor & Francis Journals, vol. 41(23), pages 2965-2976.
    5. Natália Monteiro & Miguel Portela & Odd Straume, 2011. "Firm Ownership and Rent Sharing," Journal of Labor Research, Springer, vol. 32(3), pages 210-236, September.
    6. Martins, Pedro S. & Esteves, Luiz A., 2006. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA).
    7. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    8. Sabien Dobbelaere & Jacques Mairesse, 2010. "Comparing Micro-evidence on Rent Sharing from Three Different Approaches," NBER Working Papers 16220, National Bureau of Economic Research, Inc.
    9. Pistoresi, Barbara & Strozzi, Chiara, 2001. "Rent Sharing in Wage Determination: Evidence from Italy," CEPR Discussion Papers 2939, C.E.P.R. Discussion Papers.
    10. Majumdar, Sumit K., 2010. "Institutional changes, firm size and wages in the telecommunications sector," Information Economics and Policy, Elsevier, vol. 22(3), pages 201-217, July.
    11. Barbara Pistoresi & Chiara Strozzi, 2003. "Rent Sharing and Bargaining Levels: Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 62(2), pages 145-170, October.
    12. Maritza López-Novella & Salimata Sissoko, 2009. "Working Paper 12-09 - Salaires et négociation collective en Belgique : une analyse microéconomique en panel," Working Papers 0912, Federal Planning Bureau, Belgium.
    13. Sethupathy, Guru, 2013. "Offshoring, wages, and employment: Theory and evidence," European Economic Review, Elsevier, vol. 62(C), pages 73-97.
    14. Natália P. Monteiro & Miguel Portela, 2011. "Rent Sharing In Portuguese Banking," Manchester School, University of Manchester, vol. 79(4), pages 861-883, July.

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