Compensation Structure and Product Market Competition

17 Pages Posted: 25 Jun 1998 Last revised: 30 Sep 2010

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

Laurence Allain

Cornell University

Date Written: March 1996

Abstract

The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the wage equations (derived from Abowd, Kramarz and Margolis 1994). We then make direct calculations of the quasi-rent per worker at each firm and the conditions within that firm's product market, as measured by international prices, using a representative sample of private French firms. We find that quasi- rents per worker are only mildly related to the structure of the French product market. The systematic variation in our quasi-rents is related to international market prices and work force structure, however, producing an estimate of bargaining power for the employees of about 0.4. This estimate, while slightly larger than other estimates, may be quite reasonable for the workers in an economy in which the vast majority of jobs are covered by industry-level collective bargaining agreements.

Suggested Citation

Abowd, John Maron and Allain, Laurence, Compensation Structure and Product Market Competition (March 1996). NBER Working Paper No. w5493. Available at SSRN: https://ssrn.com/abstract=3030

John Maron Abowd (Contact Author)

U.S. Census Bureau ( email )

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Cornell University Department of Economics ( email )

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School of Industrial and Labor Relations ( email )

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NBER (on leave) ( email )

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IZA Institute of Labor Economics

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Germany

Laurence Allain

Cornell University

Department of Labor Economics
Ithaca, NY 14853
United States

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