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Is There Rent Sharing in Italy? Evidence from Employer-Employee Data

  • Alessia Matano
  • Paolo Naticchioni

Using a unique employer-employee panel database, we investigate the extent of rent sharing in Italy from 1996 to 2003. We derive the following findings. First, after controlling for the national bargaining level, there is robust evidence of rent sharing at firm level. Second, by means of fixed effects estimates we show that the sorting of high-ability workers into high-profit firms appears to play a substantial role, since it captures a significant amount of cross sectional estimates of rent sharing. Third, in accordance to the related literature the endogeneity of profits causes a severe underestimation of rent sharing. Our final IV estimate of the elasticity of wages with respect to profits per employee amounts to 6%, with a "Lester" range of 24%. Moreover, we point out that the impact of rent sharing is not homogeneous across several dimensions (gender, occupation, sector and macroarea).

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Article provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.

Volume (Year): 8 (2011)
Issue (Month): 2 (December)
Pages: 265-279

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Handle: RePEc:liu:liucej:v:8:y:2011:i:2:p:265-279
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  1. Gürtzgen, Nicole, 2006. "Rent-Sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data," ZEW Discussion Papers 05-90 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Pedro S. Martins, 2007. "Rent sharing and wages," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 23-31.
  3. 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.
  4. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February.
  5. Margolis, David N. & Salvanes, Kjell G., 2001. "Do Firms Really Share Rents with Their Workers?," IZA Discussion Papers 330, Institute for the Study of Labor (IZA).
  6. Pedro S. Martins, 2008. "Rent Sharing Before and After the Wage Bill," Working Papers 12, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  7. Hilderth, A.K. & Oswald, A.J., 1993. "Rent-Sharing and Wages: Evidence form Company and Establishment Panels," Economics Series Working Papers 99154, University of Oxford, Department of Economics.
  8. Michael Rusinek & François Rycx, 2013. "Rent-Sharing under Different Bargaining Regimes: Evidence from Linked Employer–Employee Data," British Journal of Industrial Relations, London School of Economics, vol. 51(1), pages 28-58, 03.
  9. Card, David & Devicienti, Francesco & Maida, Agata, 2011. "Rent-Sharing, Hold-up, and Wages: Evidence from Matched Panel Data," IZA Discussion Papers 6086, Institute for the Study of Labor (IZA).
  10. John Pencavel & Luigi Pistaferri & Fabiano Schivardi, 2006. "Wages, Employment, and Capital in Capitalist and Worker-Owned Firms," ILR Review, Cornell University, ILR School, vol. 60(1), pages 23-44, October.
  11. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2005. "Insurance within the Firm," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1054-1087, October.
  12. Nekby, Lena, 2002. "Gender Differences in Rent Sharing and its Implications for the Gender Wage Gap," Working Paper Series 182, Trade Union Institute for Economic Research.
  13. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  14. Alessia Matano & Paolo Naticchioni, 2011. "Is there Rent Sharing in Italy? Evidence from Employer-Employee data," Working Papers - Dipartimento di Economia 11-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2011.
  15. Arai, Mahmood & Heyman, Fredrik, 2001. "Wages, Profits and Individual Unemployment Risk : Evidence from Matched Worker-Firm Data," Working Paper Series 172, Trade Union Institute for Economic Research.
  16. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
  17. Pistoresi, Barbara & Strozzi, Chiara, 2001. "Rent Sharing in Wage Determination: Evidence from Italy," CEPR Discussion Papers 2939, C.E.P.R. Discussion Papers.
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