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Title:Market power, dismissal threat and rent sharing: the role of insider and outsider forces in wage bargaining PDF Logo
Authors:Carneiro, Anabela
Portugal, Pedro
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2102
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.
Subjects:wages
market power
dismissal threat
rent sharing
system estimator
JEL:J30
J31
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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