Wages, Profits and Rent-Sharing

30 Pages Posted: 3 Jan 2002 Last revised: 17 Jul 2022

See all articles by David G. Blanchflower

David G. Blanchflower

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER); University of Stirling - Department of Economics

Andrew J. Oswald

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Peter Sanfey

European Bank for Reconstruction and Development (EBRD)

Date Written: December 1992

Abstract

The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.

Suggested Citation

Blanchflower, David G. and Oswald, Andrew J. and Sanfey, Peter, Wages, Profits and Rent-Sharing (December 1992). NBER Working Paper No. w4222, Available at SSRN: https://ssrn.com/abstract=294716

David G. Blanchflower (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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University of Stirling - Department of Economics ( email )

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Andrew J. Oswald

University of Warwick - Department of Economics ( email )

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IZA Institute of Labor Economics

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Peter Sanfey

European Bank for Reconstruction and Development (EBRD) ( email )

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