Rent Sharing and Inclusive Growth

47 Pages Posted: 7 Jan 2019

See all articles by Pawel Bukowski

Pawel Bukowski

London School of Economics & Political Science (LSE) - London School of Economics

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); London School of Economics & Political Science (LSE) - Department of Economics

Date Written: December 2018

Abstract

The long-run evolution of rent sharing is empirically studied. Based upon a comprehensive and harmonized panel of the top 300 publicly quoted British companies over thirty five years, the paper reports evidence of a significant fall over time in the extent to which firms share rents with workers. It confirms that companies do share their profits with employees, but at much smaller scale today than they did during the 1980s and 1990s. This is a robust finding, corroborated with industry-level analysis for the US and EU. The decline in rent sharing is coincident with the rise of product market power that has occurred as worker bargaining power has dropped. Although firms with more market power previously shared more of their profits, they experienced a stronger fall in rent sharing after 2000.

Keywords: Inclusive growth, Rent sharing

JEL Classification: J30

Suggested Citation

Bukowski, Pawel and Machin, Stephen J., Rent Sharing and Inclusive Growth (December 2018). CEPR Discussion Paper No. DP13408, Available at SSRN: https://ssrn.com/abstract=3310317

Pawel Bukowski

London School of Economics & Political Science (LSE) - London School of Economics

United Kingdom

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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