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Wages, Profits, and Rent-Sharing

  • Blanchflower, David G
  • Oswald, Andrew J
  • Sanfey, Peter

This paper suggests a new test for rent-sharing in the U.S. labor market. Using an unbalanced panel from the manufacturing sector, it shows that a rise in a sector's profitability leads after some years to an increase in the long-run level of wages in that sector. The paper controls for workers' characteristics, for industry fixed effects, and for unionism. Richard A. Lester's (1952) range of wages is estimated, for rent-sharing reasons alone, at approximately 24 percent of the mean wage. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 111 (1996)
Issue (Month): 1 (February)
Pages: 227-51

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Handle: RePEc:tpr:qjecon:v:111:y:1996:i:1:p:227-51
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  1. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  2. Gordon R. Sparks & David A.Wilton, 1970. "Determinants of Negotiated Wage Increases: An Empirical Analysis," Working Papers 19, Queen's University, Department of Economics.
  3. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  5. Oswald, Andrew J, 1986. "Unemployment Insurance and Labor Contracts under Asymmetric Information: Theory and Facts," American Economic Review, American Economic Association, vol. 76(3), pages 365-77, June.
  6. Max H. Bazerman, 1985. "Norms of distributive justice in interest arbitration," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(4), pages 558-570, July.
  7. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  8. David G. Blanchflower & Andrew Oswald, 1995. "International Wage Curves," NBER Chapters, in: Differences and Changes in Wage Structures, pages 145-174 National Bureau of Economic Research, Inc.
  9. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  10. Nickell, S. & Wadhwani, S., 1989. "Insider Forces And Wage Determination," Papers 334, London School of Economics - Centre for Labour Economics.
  11. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-70, May.
  12. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
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