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

Abstract

Using Belgian linked employer–employee data, we examine how collective bargaining arrangements affect the relationship between firms' profitability and individual wages via rent‐sharing. In industries where agreements are usually renegotiated at firm‐level (‘decentralized industries’) wages and firm‐level profits are positively correlated regardless of the type of collective wage agreement by which the workers are covered (industry or firm). On the other hand, where firm‐level wage renegotiation is less common (‘centralized industries’), wages are only significantly related to firms' profitability for workers covered by a firm‐level collective agreement. Thus, industry‐wide contracts that are not complemented by a firm‐level collective agreement suppress the impact of firm profits on workers' wages in centralized industries.

Rent Sharing in Portuguese Banking *

“…In particular, Güertzgen (2009) finds that, in Germany, wages respond stronger to firm quasi-rents in non-unionized sectors with firm-specific wage contracts than in unionized sectors with industry-wide wage agreements. Along the same lines, Rusinek and Rycx (2008) find that, in Belgium, rent sharing is higher in industries with more decentralized wage setting. This paper contributes to this current debate on the linkages between wages, firm-specific profitability and collective bargaining by focusing on one industry: banking in Portugal.…”

Firms' Rents, Workers' Bargaining Power and the Union Wage Premium

“…With respect to this classification, I focus solely on the union wage premium at firm or establishment level, much like the Anglo-Saxon studies (where private sector bargaining is purely decentralised) and Card and De La Rica's (2005) studies on Spain. My approach differs in this from a recent body of literature on continental European countries, which focuses on industry-level bargaining and the relative influence of the different bargaining levels on the overall structure of wages (Cardoso and Portugal, 2005;Plasman et al, 2007;Avouyi-Dovi et al, 2009;G€ urtzgen, 2009;Rusinek and Rycx, 2011;Fitzenberger et al, 2013). 12 Firm-level (establishment-level) agreements can be signed between unions and employers once the unions have been recognised within firms (establishments).…”

Profit Sharing and the Firm‐Size Wage Premium

“…In particular, we apply a novel approach that identifies firms that use profit sharing schemes and workers who participate in such schemes. As such, the study contributes to the recent literature focusing on wages and profit sharing, including Arai and Heyman (2009), Andrews et al (2010), Long and Fang (2012), Rusinek and Rycx (2013) and Card et al (2014), and from a more general perspective, it extends the multi-country analyses of Lallemand et al (2007) and Albaek et al (1998), who examine firm-size wage premiums in five European countries (Belgium, Denmark, Ireland, Italy, and Spain) and four Nordic countries (Denmark, Finland, Norway, and Sweden), respectively.…”

“…Second, we use firm-and individual-level information on profit sharing programs to examine the relationship empirically. As such, the study contributes to research on the wage-profit relationship that has recently focused on profitability and wages by bargaining structures (Guertzgen, 2009;Rusinek and Rycx, 2013), the effects of the adoption of profit sharing schemes on wages (Long and Fang, 2012), asymmetry in the relationship between profits and wages over firm business cycles (Arai and Heyman, 2009), and the role of sunk capital in rent sharing (Card et al, 2014).…”

“…Total pay increases in both types of firms while the total pay premium in equation [8] remains constant. 19 Following Guertzgen (2009) and Rusinek and Rycx (2013), we attempted to examine whether the association between profit sharing and wages varies across the level of bargaining, i.e. centralized versus decentralized (industry-level) bargaining.…”