Working Paper: NBER ID: w4222
Authors: David O. Blanchflower; Andrew J. Oswald; Peter Sanfey
Abstract: The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.
Keywords: wages; profits; rent-sharing; labor markets
JEL Codes: J31; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wages (J31) | profitability (L21) |
| profitability (L21) | wages (J31) |
| unemployment (J64) | wages (J31) |