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International Competition and Rent Sharing in French Manufacturing: A Firm-Level Analysis

Lionel Nesta and Stefano Schiavo

No 19, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: This paper investigates the impact of import competition on rent sharing between firms and employees using a large panel of French manufacturing firms. First, by applying recent advances in the estimation of price-costs margins, we are able to classify each firm into labour- and product-market regimes based on the presence/absence of market power and to estimate the degree of rent sharing among firms and workers. Second, we investigate the hypothesis that import penetration acts as a discipline device on the labour market, reducing workers’ bargaining power. We find that competition from OECD countries has a negative effect on bargaining power, whereas imports from low-wage countries have a more muted impact. By providing firm-level evidence for the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalisation on the labour market.

Date: 2018
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