Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33436 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 2102
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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

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