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Comparing micro-evidence on rent sharing from two different econometric models

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Abstract

The extent to which employers share rents with their employees is typically assessed by estimating the responsiveness of workers’ wages on firms’ ability to pay. This paper compares rent-sharing estimates using such a wage determination regression with estimates based on a productivity regression that relies on standard firm-level input and output data. Using a large matched firm-worker panel data sample for French manufacturing, we find that the respective industry distributions of the rent-sharing estimates are correlated and slightly overlap, but are significantly different on average. Precisely, if we only rely on the firm-level information, we obtain an average rent-sharing estimate of roughly 0.30 for the productivity regression and 0.17 for the wage determination regression. When we also take advantage of the worker-level information to control for unobserved worker ability in the model of wage determination, we find as expected a lower average value of 0.10.

    Research areas

  • Matched employer-employee data, Production function, Rent sharing, Wage equation, UNITED-STATES, LIMITED MOBILITY BIAS, PRICE-COST MARGINS, FIRMS, TRADE-UNIONS, LABOR-MARKET, CAPITAL-SKILL COMPLEMENTARITY, BARGAINING POWER, PANEL-DATA, INTERINDUSTRY WAGE DIFFERENTIALS
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Details

Original languageEnglish
Pages (from-to)18-26
Number of pages9
JournalLabour Economics
Volume52
DOIs
Publication statusPublished - 1 Jun 2018