Insider Power and Wage Determination in Bulgaria An Econometric Investigation

Using a unique 3-digit firm level data set of all medium and large sized manufacturing enterprises in Bulgaria covering the years 1997/1998, we investigate how wage detfirmination is related to ownership status. Building on a slightly modified version of the Right-To-Manage Model, our pooled OLS, panel and first-differences TSLS estimates show statistically significant differences in the share of rents taken by workers employed in state, private domestic and foreign firms. Taking account of firm heterogeneity, we find that rent sharing is nearly non-existent in foreign-owned firms while the level of pay is higher compared to state-owned companies. Further, rent sharing seems to be highly pronounced in state-owned enterprises while on average domestically private-owned companies are characterised by less rent sharing. Overall, our robustness checks confirm these findings.