IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Inter-industry wage differentials: How much does rent sharing matter?

Listed author(s):
  • Philip Du Caju
  • François Rycx
  • Ilan Tojerow

This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering all the years from 1999 to 2005. Findings show the existence of large wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. These differentials are persistent and no particular downward or upward trend is observed. Further results indicate that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. The time dimension of our matched employer-employee data allows us to instrument firms' profitability by its lagged value. The instrumented elasticity between wages and profits is found to be quite stable over time and varies between 0.034 and 0.043. It follows that Lester’s range of pay due to rent sharing fluctuates between about 24 and 37 percent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits. JEL Classification: D31, J31, J41

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/138898.

as
in new window

Length:
Date of creation: 2011
Publication status: Published in: Manchester School (2011) v.79 n° 4,p.691-717
Handle: RePEc:ulb:ulbeco:2013/138898
Contact details of provider: Postal:
CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles

Web page: http://difusion.ulb.ac.be

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Brenda Gannon & Robert Plasman & François Rycx & Ilan Tojerow, 2005. "Inter-industry wage differentials and the gender wage gap: evidence from European countries," DULBEA Working Papers 05-01.RS, ULB -- Universite Libre de Bruxelles.
  2. Magda, Iga & Rycx, Francois & Tojerow, Ilan & Valsamis, Daphné, 2008. "Wage Differentials across Sectors in Europe: An East-West Comparison," IZA Discussion Papers 3830, Institute for the Study of Labor (IZA).
  3. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Why do large firms pay higher wages? evidence from matched worker-firm data," ULB Institutional Repository 2013/8743, ULB -- Universite Libre de Bruxelles.
  4. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-337, April.
  5. Du Caju, Philip & Fuss, Catherine & Wintr, Ladislav, 2007. "Downward wage rigidity for different workers and firms: an evaluation for Belgium using the IWFP procedure," Working Paper Series 0840, European Central Bank.
  6. David Margolis & Kjell G. Salvanes, 2000. "Do Firms Really Share Rents with Their Employees?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00367838, HAL.
  7. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  8. Vannetelbosch, V. J., "undated". "Testing between alternative wage-employment bargaining models using Belgian aggregate data," CORE Discussion Papers RP 1233, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers.
  10. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, December.
  11. Maria Jepsen & Sile Padraigin O'Dorchai & Robert Plasman & François Rycx, 2005. "The wage penalty induced by part-time work: the case of Belgium," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 48(1-2), pages 73-94.
  12. Fathi Fakhfakh & Felix FitzRoy, 2004. "Basic Wages and Firm Characteristics: Rent Sharing in French Manufacturing," LABOUR, CEIS, vol. 18(4), pages 615-631, December.
  13. François Rycx & Ilan Tojerow, 2007. "Inter-Industry Wage Differentials: What Do We Know?," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 13-22.
  14. Anne Plasman & Robert Plasman & Michael Rusinek & François Rycx, 2001. "Indicators on gender pay equality: the Belgian presidency's report," ULB Institutional Repository 2013/9805, ULB -- Universite Libre de Bruxelles.
  15. Maria Jepsen, 2001. "Evaluation des différentiels salariaux en Belgique: hommes-femmes et temps partiel-temps plein," ULB Institutional Repository 2013/8583, ULB -- Universite Libre de Bruxelles.
  16. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics 1999:3, Stockholm University, Department of Economics.
  17. Holmlund, B. & Zetterberg, J., 1989. "Insider Effects In Wage Determination: Evidence From Five Countries," Papers 1989a, Uppsala - Working Paper Series.
  18. repec:ulb:ulbeco:2013/138902 is not listed on IDEAS
  19. Edin, Per-Anders & Zetterberg, Johnny, 1992. "Interindustry Wage Differentials: Evidence from Sweden and a Comparison with the United States," American Economic Review, American Economic Association, vol. 82(5), pages 1341-1349, December.
  20. Martins, Pedro S., 2004. "Industry wage premia: evidence from the wage distribution," Economics Letters, Elsevier, vol. 83(2), pages 157-163, May.
  21. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
  22. L Christofides & A Oswald, 1991. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," CEP Discussion Papers dp0042, Centre for Economic Performance, LSE.
  23. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  24. John A. Abowd & Thomas Lemieux, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 983-1014.
  25. Mead Over & Dean Jolliffe & Andrew Foster, 1996. "Huber correction for two-stage least squares estimates," Stata Technical Bulletin, StataCorp LP, vol. 5(29).
  26. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
  27. Plasman, Robert & Rycx, Francois & Tojerow, Ilan, 2006. "Industry Wage Differentials, Unobserved Ability, and Rent-Sharing: Evidence from Matched Worker-Firm Data, 1995-2002," IZA Discussion Papers 2387, Institute for the Study of Labor (IZA).
  28. Martins, Pedro S., 2004. "Rent Sharing Before and After the Wage Bill," IZA Discussion Papers 1376, Institute for the Study of Labor (IZA).
  29. repec:ulb:ulbeco:2013/134392 is not listed on IDEAS
  30. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
  31. Thierry Lallemand & François Rycx, 2009. "Are Young and Old WorkersS Harmful for Firm Productivity ?," Working Papers CEB 09-002.RS, ULB -- Universite Libre de Bruxelles.
  32. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
  33. Barth, Erling & Zweimuller, Josef, 1992. "Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S," Institute for Research on Labor and Employment, Working Paper Series qt1811h146, Institute of Industrial Relations, UC Berkeley.
  34. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
  35. Giovanni Ferro-Luzzi, 1994. "Inter-Industry Wage Differentials in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 130(III), pages 421-443, September.
  36. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
  37. Joop Hartog & Pedro Pereira & José Vieira, 2000. "Inter-industry Wage Dispersion in Portugal," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(4), pages 353-364, December.
  38. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-industry wage differentials in EU countries: what do cross-country time varying data add to the picture?," MNB Working Papers 2010/9, Magyar Nemzeti Bank (Central Bank of Hungary).
  39. François Rycx & Ilan Tojerow & Robert Plasman, 2004. "Rent sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/785, ULB -- Universite Libre de Bruxelles.
  40. Frank Walsh, 1995. "A multisector model of efficiency wages," Working Papers 199501, School of Economics, University College Dublin.
  41. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
  42. Alan Carruth & William Collier & Andy Dickerson, 2004. "Inter-industry Wage Differences and Individual Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 811-846, December.
  43. Vainiomaki, Jari & Laaksonen, Seppo, 1995. "Inter-industry wage differentials in Finland: Evidence from longitudinal census data for 1975-85," Labour Economics, Elsevier, vol. 2(2), pages 161-173, June.
  44. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  45. Frédéric Docquier & Sébastien Laurent & Sergio Perelman, 1999. "Capital humain, emploi et revenus du travail: Belgique, 1992," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 161, pages 77-103.
  46. Helwege, Jean, 1992. "Sectoral Shifts and Interindustry Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 55-84, January.
  47. Benito, Andrew, 2000. " Inter-industry Wage Differentials in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 727-746, Special I.
  48. Mahmood Araï & Gérard Ballot & Ali Skalli, 1996. "Différentiels intersectoriels de salaire et caractéristiques des employeurs en France," Économie et Statistique, Programme National Persée, vol. 299(1), pages 37-58.
  49. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
  50. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  51. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
  52. Richard A. Lester, 1952. "A Range Theory of Wage Differentials," ILR Review, Cornell University, ILR School, vol. 5(4), pages 483-500, July.
  53. Robert Plasman & François Rycx & Ilan Tojerow, 2006. "Industry wage differentials, unobserved ability, and rent-sharing: evidence from matched employer-employee, 1992-2005," DULBEA Working Papers 06-14.RS, ULB -- Universite Libre de Bruxelles.
  54. Joseph E. Stiglitz, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC's: The Labor Turnover Model," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 194-227.
  55. Kahn, Lawrence M, 1998. "Collective Bargaining and the Interindustry Wage Structure: International Evidence," Economica, London School of Economics and Political Science, vol. 65(260), pages 507-534, November.
  56. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
  57. Kevin Reilly & Luisa Zanchi, 2002. "Industry Wage Differentials: How Many, Big and Significant Are They?," Labor and Demography 0209001, EconWPA.
  58. repec:hal:journl:halshs-00369141 is not listed on IDEAS
  59. Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ulb:ulbeco:2013/138898. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.