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Rent Sharing Before and After the Wage Bill

  • Pedro S. Martins

Many biases plague the analysis of whether employers share rents with their employees, unlike what is predicted by the competitive labour market model. Using a Portuguese matched employer-employee panel, this article is one of the first to address these biases 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 firm's 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 specifications, in significant evidence of rent sharing (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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  16. Hilderth, A.K. & Oswald, A.J., 1993. "Rent-Sharing and Wages: Evidence form Company and Establishment Panels," Economics Series Working Papers 99154, University of Oxford, Department of Economics.
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  26. repec:hal:journl:halshs-00369141 is not listed on IDEAS
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