Microdata Evidence on Rent-Sharing

Mahmood Arai and Fredrik Heyman

No 198, Working Paper Series from Trade Union Institute for Economic Research

Abstract: We examine the effect of firm profits on wages for individual workers while focusing on the empirical complications associated with estimating the extent of rent-sharing. Controlling for worker and firm fixed-effects and using several instruments to deal with the endogeneity of profits, we report results indicating that OLS-estimates strongly underestimate the effects of profits on wages. Moreover, the effect of profits on wages are estimated separately for firms with increasing and decreasing profits within a given time period. We find a positive and stable effect only in firms with increasing profits. This is in line with the idea that falling profits do not lead to wage cuts while increasing profits imply higher wages.

Keywords: Rent-sharing; Matched employer- employee data (search for similar items in EconPapers)
JEL-codes: D31 J31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-12-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Microdata evidence on rent-sharing (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:fiefwp:0198

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