Wages, Profits and Rent-Sharing

30 Pages Posted: 3 Jan 2002 Last revised: 19 Jul 2010

See all articles by David G. Blanchflower

David G. Blanchflower

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Peter G. Peterson Institute for International 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 )

Hanover, NH 03755
United States
603-646-2536 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Germany

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Andrew J. Oswald

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
523510 (Phone)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Peter Sanfey

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

One Exchange Square
London, EC2A 2JN
United Kingdom
+44 20 7338 6227 (Phone)
+44 20 7338 6110 (Fax)

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