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Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining

Anabela Carneiro () and Pedro Portugal

No 2102, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: One of the predictions of the insider-outsider theory is that wages will be higher in sectors (firms) with high labor adjustment costs/high turnover costs. This prediction is tested empirically in this study, using an insider-outsider model and a longitudinal panel of large firms in Portugal. The results revealed that firms where insider workers appear to have more market power tend to pay higher wages. In particular, we found that the threat of dismissal acts to weaken insiders’ bargaining power and, consequently, to restrain their wage claims. Moreover, the results also showed that real wages in Portugal are downward rigid.

Keywords: market power; wages; rent sharing; system GMM estimator; dismissal threat (search for similar items in EconPapers)
JEL-codes: J30 J31 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006-04
New Economics Papers: this item is included in nep-bec and nep-mic
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Published in: International Journal of Manpower, 2008, 29 (1), 30-47

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Related works:
Journal Article: Market power, dismissal threat, and rent sharing: The role of insider and outsider forces in wage bargaining (2008) Downloads
Working Paper: Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining (2006) Downloads
Working Paper: Market Power, Dismissal Threat, and Rent Sharing: the Role of Insider and Outsider Forces in Wage Bargaining (2004)
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