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Market Power, Dismissal Threat, and Rent Sharing: the Role of Insider and Outsider Forces in Wage Bargaining

Author

Listed:
  • Anabela Carneiro

    () (CETE, Faculdade de Economia, Universidade do Porto)

  • Pedro Portugal

    () (Banco de Portugal and Universidade Nova de Lisboa)

Abstract

This study investigates wage determination at the firm level using a longitudinal panel of large firms in Portugal. The results revealed that insider forces such as revenue per employee and market share have a significant impact on wage determination. The results also showed that insider-outsider considerations seem to be empirically relevant in Portugal. That is, firms where insider workers seem to have more market power tend to pay higher wages. More specifically, in firms with low layoff rates, high proportion of permanent employees and high rates of labour utilization workers seem to be in a better position to extract rents in the form of higher wages.

Suggested Citation

  • Anabela Carneiro & Pedro Portugal, 2004. "Market Power, Dismissal Threat, and Rent Sharing: the Role of Insider and Outsider Forces in Wage Bargaining," CEF.UP Working Papers 0403, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:cetedp:0403
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2012. "Downward Wage Regidity for Different Workers and Firms," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(1), pages 5-32.
    2. Sónia Torres & John T. Addison & Paulo Guimarães & Pedro Portugal, 2010. "The Sources of Wage Variation: An Analysis Using Matched Employer-Employee Data," Working Papers w201025, Banco de Portugal, Economics and Research Department.
    3. Catherine Fuss & Ladislav Wintr, 2012. "Rigid Wages and Flexible Employment ?Contrasting Responses to Firm-Level and Sector-Level Productivity Developments," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(3), pages 241-268.
    4. Natália Monteiro & Miguel Portela & Odd Straume, 2011. "Firm Ownership and Rent Sharing," Journal of Labor Research, Springer, vol. 32(3), pages 210-236, September.
    5. Pedro Portugal, 2006. "Wage Setting in the Portuguese Labor Market: A Microeconomic Approach," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

    More about this item

    Keywords

    wages; market power; dismissal threat; rent sharing; instrumental variables;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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