Rent Sharing Before and After the Wage Bill

Pedro Martins

No 1376, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Many biases plague the estimation of rent sharing in labour markets. Using a Portuguese matched employer-employee panel, these biases are addressed in this paper 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 firms’ 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 specification, in a Lester range of pay dispersion of 56%, also shown to be robust to a number of competitive interpretations.

Keywords: rent sharing; matched employer-employee data; fixed effects; instrumental variables (search for similar items in EconPapers)
JEL-codes: C33 J31 J41 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2004-11
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Published - published in: Applied Economics, 2009, 41(17), 2133-2151

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Related works:
Journal Article: Rent sharing before and after the wage bill (2009)
Working Paper: Rent Sharing Before and After the Wage Bill (2008)
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