Do Firms Share Their Success with Workers. The Response of Wages to ProductMarket Conditions

摘要

We provide strong new evidence that industry financial conditions play animportant role in wage determination in the U.S. manufacturing sector. Ordinary least squares estimate of rents per worker on wages are positive and signicant, but quite small. However, using two standard bargaining models, we illustrate that this may stem from a variety of econometric difficulties that plague the OLS estimates. In this paper, we are able to overcome these issues and identify the effects of the industry financial situation on wages. We do this using the U.S. input-output tables to isolate exogenous variation in an industry's product market conditions. Our instrumental variable estimates reveal a substantial amount of rent sharing in U.S. manufacturing much more than is consistent with a purely competitive labor market.