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Do Workers Share in Firm Success? Pass-through Estimates for New Zealand

Author

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  • Allan, Corey

  • Maré, David C.

    (Motu Economic and Public Policy Research Trust)

Abstract

We study the extent to which firm financial performance is passed on to workers in the form of higher wages and how this has changed over 2002-2018. We measure financial performance as value added per worker and as quasi-rents. Quasi-rents better approximate the resources available to be shared between workers and firms as the measure takes into account the rental cost of capital as well as the reservation wages. We estimate the reservation wage bill for each firm using estimates from a two-way fixed-effect model and further decompose the pass-through into contributions from worker sorting and rent-sharing. Our IV estimates of pass-through are in the range of 0.12 and 0.19 for value added and 0.11 and 0.07 for quasi-rents. Worker sorting explains between 35% and 50% of pass-through. While the extent of overall pass-through is relatively stable over time, the contribution of worker sorting declines dramatically to explain almost none of the estimated pass-through.

Suggested Citation

  • Allan, Corey & Maré, David C., 2021. "Do Workers Share in Firm Success? Pass-through Estimates for New Zealand," IZA Discussion Papers 14764, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14764
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    Cited by:

    1. Allan, Corey & Maré, David C. & Hyslop, Dean R., 2025. "Monopsony in the New Zealand Labour Market: First Estimates from Administrative Data," IZA Discussion Papers 17614, Institute of Labor Economics (IZA).
    2. Allan, Corey & Maré, David C., 2022. "Who Benefits from Firm Success? Heterogenous Rent Sharing in New Zealand," IZA Discussion Papers 15264, Institute of Labor Economics (IZA).
    3. Fabling Richard, 2024. "Still medalling: Productivity gets a bronze (data source)," Motu Working Papers 24_06, Motu Economic and Public Policy Research.
    4. David C. Maré & Richard Fabling, 2025. "Firms and ethnic wage differences," Motu Working Papers 25_07, Motu Economic and Public Policy Research.

    More about this item

    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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