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Title:Rent-sharing, hold-up, and wages: Evidence from matched panel data PDF Logo
Authors:Card, David
Devicienti, Francesco
Maida, Agata
Issue Date:2011
Series/Report no.:Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6086
Abstract:It is widely believed that rent-sharing reduces the incentives for investment when long term contracts are infeasible because some of the returns to sunk capital are captured by workers. We propose a simple test for the degree of hold-up based on the fraction of capital costs that are deducted from the quasi-rent that determines negotiated wages. We implement the test using a data set that combines Social Security earnings records for workers in the Veneto region of Italy with detailed financial information for employers. We find strong evidence of rent-sharing, with an elasticity of wages with respect to current profitability of the firm of 3-7%, arising mainly from firms in concentrated industries. On the other hand we find little evidence that bargaining lowers the return on investment. Instead, firm-level bargaining appears to split the rents after deducting the full cost of capital.
Subjects:rent-sharing
hold-up
employer-employee data
JEL:J31
Persistent Identifier of the first edition:urn:nbn:de:101:1-201111213134
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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