Rent-sharing, Holdup, and Wages: Evidence from Matched Panel Data
Rent-sharing by workers can reduce the incentives for investment if some of the returns to sunk capital are captured in higher wages. We propose a simple measure of this "holdup" effect based on the size of the wage offset for firm-specific capital accumulation. Using Social Security earnings records for workers in the Veneto region of Italy linked to detailed financial data for their employers, we find strong evidence of rent-sharing, with an elasticity of wages with respect to potential rents per worker of around 4%, arising mainly at larger firms with higher price-cost margins. On the other hand, we find little evidence that bargaining lowers the return on investment. Instead, firm-level bargaining appears to split the rents after deducting the full cost of capital. Copyright 2014, Oxford University Press.
Year of publication: |
2014
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Authors: | Card, David ; Devicienti, Francesco ; Maida, Agata |
Published in: |
Review of Economic Studies. - Oxford University Press. - Vol. 81.2014, 1, p. 84-111
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Publisher: |
Oxford University Press |
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