Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58840
Authors: 
Card, David
Devicienti, Francesco
Maida, Agata
Year of Publication: 
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: 
Document Type: 
Working Paper

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