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Rent-Sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data

  • Gürtzgen, Nicole

Using a linked employer-employee data set, this paper analyses the relationship between firm profitability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to firm-specific rents varies with collective bargaining coverage. To address this issue, we distinguish sector-specific wage agreements, firm-specific wage agreements and wage determination without any bargaining coverage. Our findings indicate that individual wages are positively related to firm-specific quasi-rents in the non-union sector and under firm-specific contracts. Industry-wide wage contracts, however, seem to suppress firm-level rent-sharing. While pooled OLS estimates yield a positive correlation between wages and quasirents under centralised contracts, estimates accounting for unobserved individual and establishment heterogeneity point to a coefficient of zero. Finally, GMM estimates using suitable lagged values as instruments indicate that this result appears to be robust to the endogeneity of quasi-rents.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 05-90 [rev.].

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Date of creation: 2006
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Handle: RePEc:zbw:zewdip:7185
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