Rent-Sharing under Different Bargaining Regimes: Evidence from Linked Employer-Employee Data

In many European countries, the majority of workers have their wages directly defined byindustry-level agreements. In addition, for some workers, industry agreements arecomplemented by firm-specific agreements. Yet, the relative importance of firm and industryagreements (in other words, the degree of centralization) differs drastically across industries.The authors of this paper use unique linked employer-employee data from a 2003 survey inBelgium to examine how these bargaining features affect the extent of rent-sharing. Theirresults show that there is substantially more rent-sharing in decentralized than in centralizedindustries, even when controlling for the endogeneity of profits, for heterogeneity amongworkers and firms and for differences in characteristics between bargaining regimes.Moreover, in centralized industries, rent-sharing is found only for workers that are covered bya firm agreement. Finally, results indicate that within decentralized industries, both firm andindustry bargaining generate rent-sharing to the same extent.