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Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil

Author

Listed:
  • Pedro Martins

    (Queen Mary, University of London; IZA, Bonn; and CEG-IST, Lisbon)

  • Luiz Alberto Esteves

    (Department of Economics, Universidade Federal do Paraná)

Abstract
We provide evidence about the determinants of the wage structures of developing countries by examining the case of Brazil. Our specific question is whether Brazil’s dramatic income and wage differentials can be explained by the division of rents between firms and their employees, unlike in competitive labour markets. Using detailed individual-level matched panel data, covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002, we consider the endogeneity of profits, by adopting different measures of profits and different instruments and by controlling for spell fixed effects. Our results, robust to different specifications and tests, indicate no evidence of rent sharing. This conclusion contrasts with findings for most developed countries, even those with flexible labour markets. Possible explanations for the lack of rent sharing include the weakness of labour-market institutions, the high levels of worker turnover and the macroeconomic instability faced by the country.

Suggested Citation

  • Pedro Martins & Luiz Alberto Esteves, 2007. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil," Working Papers 0060, Universidade Federal do Paraná, Department of Economics.
    • Handle: RePEc:fup:wpaper:0060
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    References listed on IDEAS

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    Cited by:

    1. Pedro S. Martins & Luiz A. Esteves, 2012. "Wages and Profits in Manufacturing Firms: Matched-Panel Evidence from Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(3b), pages 815-841.
    2. Lionel Fontagné & Michela Limardi, 2011. "The Outcome of NGOs' Activism in Developing Countries under Visibility Constraint," Working Papers halshs-00630096, HAL.
    3. Wenjing Duan & Pedro S. Martins, 2022. "Rent sharing in China: Magnitude, heterogeneity and drivers," British Journal of Industrial Relations, London School of Economics, vol. 60(1), pages 176-219, March.
    4. Pedro S. Martins & Luiz A. Esteves, 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," Working Papers 15, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    5. Martins, Pedro S. & Esteves, Luiz A., 2006. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute of Labor Economics (IZA).
    6. repec:dau:papers:123456789/5843 is not listed on IDEAS
    7. Luiz A. Esteves & Pedro S. Martins, 2008. "Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data," Working Papers 16, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    8. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
    9. Cagatay Bircan, 2013. "Foreign direct investment and wages: does the level of ownership matter?," Working Papers 157, European Bank for Reconstruction and Development, Office of the Chief Economist.
    10. Asteriou, Dimitrios & Dimelis, Sophia & Moudatsou, Argiro, 2014. "Globalization and income inequality: A panel data econometric approach for the EU27 countries," Economic Modelling, Elsevier, vol. 36(C), pages 592-599.
    11. Michela Limardi, 2011. "The Ambiguous Outcome of NGOs' Activism in Developing Countries," ERSA conference papers ersa11p555, European Regional Science Association.

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    More about this item

    Keywords

    Wage Bargaining; Instrumental Variables; Matched Employer-Employee Data; Developing Countries;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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