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Rent Sharing Before and After the Wage Bill

  • Pedro S. Martins

Many biases plague the estimation of rent sharing in labour markets. Using a Portuguese matched employer-employee panel, these biases are addressed in this paper in three complementary ways: 1) Controlling directly for the fact that firms that share more rents will, ceteris paribus, have lower net-of-wages profits. 2) Instrumenting profits via interactions between the exchange rate and the share of exports in firms’ total sales. 3) Considering firm or firm/worker spell fixed effects and highlighting the role of downward wage rigidity. These approaches clarify conflicting findings in the literature and result, in our preferred specification, in a Lester range of pay dispersion of 56%, also shown to be robust to a number of competitive interpretations.

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Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 200405.

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Date of creation: 15 Dec 2004
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Handle: RePEc:san:wpecon:0405
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