Microdata evidence on rent-sharing
(2009) In Applied Economics 41(23). p.2965-2976- 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 Ordinary Least Square (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... (More)
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 Ordinary Least Square (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.
(Less)
- author
- Arai, Mahmood and Heyman, Fredrik LU
- publishing date
- 2009-10-01
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Applied Economics
- volume
- 41
- issue
- 23
- pages
- 12 pages
- publisher
- Routledge
- external identifiers
-
- scopus:70349675643
- ISSN
- 0003-6846
- DOI
- 10.1080/00036840701721620
- language
- English
- LU publication?
- no
- id
- 655e2b5e-f510-43b3-bacf-2ddc3310f1f9
- date added to LUP
- 2019-09-17 09:14:15
- date last changed
- 2022-04-18 17:47:48
@article{655e2b5e-f510-43b3-bacf-2ddc3310f1f9,
abstract = {{<p>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 Ordinary Least Square (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.</p>}},
author = {{Arai, Mahmood and Heyman, Fredrik}},
issn = {{0003-6846}},
language = {{eng}},
month = {{10}},
number = {{23}},
pages = {{2965--2976}},
publisher = {{Routledge}},
series = {{Applied Economics}},
title = {{Microdata evidence on rent-sharing}},
url = {{http://dx.doi.org/10.1080/00036840701721620}},
doi = {{10.1080/00036840701721620}},
volume = {{41}},
year = {{2009}},
}