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Wages, Profits and Individual Unemployment Risk : Evidence from Matched Worker-Firm Data


  • Arai, Mahmood

    (FIEF and Department of Economics, Stockholm University)

  • Heyman, Fredrik

    (Trade Union Institute for Economic Research)


We present new evidence on the extent of rent sharing based on a large panel of matched worker-firm data for Sweden. Controlling for worker and firm heterogeneity, as well as examining the problem of endogeneity of profits, we report evidence implying the existence of rent sharing. Another result is that unemployment risk, aggregated at the firm and various industry levels, has a negative effect on individual workers' wages after controlling for individual differences in unemployment risk.

Suggested Citation

  • 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.
  • Handle: RePEc:hhs:fiefwp:0172

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    References listed on IDEAS

    1. 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.
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    5. David Margolis & Kjell G. Salvanes, 2000. "Do Firms Really Share Rents with Their Employees?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00367838, HAL.
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    8. 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 143-170, May.
    9. Stephen Nickell & D Nicolitsas, 1994. "Wages," CEP Discussion Papers dp0219, Centre for Economic Performance, LSE.
    10. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
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    13. 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.
    14. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Pedro S. Martins & Luiz A. Esteves, 2012. "Wages and Profits in Manufacturing Firms: Matched-Panel Evidence from Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(3b), pages 815-841.
    2. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
    3. Navon, Guy & Tojerow, Ilan, 2006. "The Effects of Rent-Sharing on the Gender Wage Gap in the Israeli Manufacturing Sector," IZA Discussion Papers 2361, Institute for the Study of Labor (IZA).
    4. Pinheiro, Roberto & Visschers, Ludo, 2015. "Unemployment risk and wage differentials," Journal of Economic Theory, Elsevier, vol. 157(C), pages 397-424.
    5. Lundborg, Per, 2005. "Wage Fairness, Growth and the Utilization of R&D Workers," Working Paper Series 206, Trade Union Institute for Economic Research.
    6. Ilan Tojerow & François Rycx, 2004. "Rent-sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/245700, ULB -- Universite Libre de Bruxelles.
    7. Alessia Matano & Paolo Naticchioni, 2017. "The Extent of Rent Sharing along the Wage Distribution," British Journal of Industrial Relations, London School of Economics, vol. 55(4), pages 751-777, December.
    8. 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).
    9. Alessia Matano & Paolo Naticchioni, 2011. "Is There Rent Sharing in Italy? Evidence from Employer-Employee Data," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(2), pages 265-279, December.
    10. Agell, Jonas & Bennmarker, Helge, 2002. "Wage Policy and Endogenous Wage Rigidity: A Representative View from the Inside," Research Papers in Economics 2002:12, Stockholm University, Department of Economics.
    11. Nannan Lundin & Lihong Yun, 2009. "International Trade and Inter-Industry Wage Structure in Swedish Manufacturing: Evidence from Matched Employer-Employee Data," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 87-102, February.
    12. Lundborg, Per, 2005. "Wage Theories for the Swedish Labour Market," Working Paper Series 207, Trade Union Institute for Economic Research.
    13. Selén, Jan & Ståhlberg, Ann-Charlotte, 2004. "Wage and Compensation Inequality — How Different?," Working Paper Series 197, Trade Union Institute for Economic Research.
    14. Nekby, Lena, 2003. "Gender differences in rent sharing and its implications for the gender wage gap, evidence from Sweden," Economics Letters, Elsevier, vol. 81(3), pages 403-410, December.
    15. 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.

    More about this item


    Wages; Profits; Rent-Sharing; Wage-curve;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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