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

Author

Listed:
  • Pedro Portugal
  • Anabela Carneiro

Abstract

One of the predictions of the insider-outsider theory is that wages will be higher in sectors (firms) with high labor adjustment costs/high turnover costs. This prediction is tested empirically in this study, applying an insider-outsider model to a longitudinal panel of large firms in Portugal. The results revealed that firms where insider workers appear to have more bargaining power tend to pay higher wages. In particular, we found that the threat of dismissal acts to weaken insiders' bargaining power and, consequently, to restrain their wage claims. Moreover, the results also showed that real wages are downward rigid in the Portuguese labor market.

Suggested Citation

  • Pedro Portugal & Anabela Carneiro, 2006. "Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining," Working Papers w200610, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w200610
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200610.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. 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.
    3. Paulo Guimarães & Pedro Portugal & Sónia Torres, 2010. "The Sources of Wage Variation: An Analysis Using Matched Employer-Employee Data," Working Papers w201025, Banco de Portugal, Economics and Research Department.
    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. repec:ptu:bdpart:b200610 is not listed on IDEAS

    More about this item

    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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