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Rent-Sharing and Wages: Evidence from Company and Establishment Panels

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  • Hildreth, Andrew K G
  • Oswald, Andrew J

Abstract

A central question in labor economics and macroeconomics is whether the textbook competitive model provides an adequate representation of the labor market. Using longitudinal data on companies and establishments, this article suggests that it may not. As predicted by rent-sharing models of the labor market, changes in profitability are shown to feed through into long-run changes in wages. These are not temporary wage effects and are not driven by the unionized workplaces in the data. The article's estimates imply that, for rent-sharing reasons alone, Richard A. Lester's (1952) 'range' of wages is approximately 16 percent. Copyright 1997 by University of Chicago Press.

Suggested Citation

  • Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-337, April.
  • Handle: RePEc:ucp:jlabec:v:15:y:1997:i:2:p:318-37
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    1. John Van Reenen, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U. K. Companies," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 195-226.
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    7. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 227-251.
    8. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    9. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    10. Marcello Estevao & Stacey Tevlin, 1995. "The role of profits in wage determination: evidence from US manufacturing," Finance and Economics Discussion Series 95-48, Board of Governors of the Federal Reserve System (US).
    11. Steven G. Allen, 1995. "Updated Notes on the Interindustry Wage Structure, 1890–1990," ILR Review, Cornell University, ILR School, vol. 48(2), pages 305-321, January.
    12. Levine, David I, 1993. "Fairness, Markets, and Ability to Pay: Evidence from Compensation Executives," American Economic Review, American Economic Association, vol. 83(5), pages 1241-1259, December.
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