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Is There Rent Sharing in Italy? Evidence from Employer-Employee Data

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Author(s): Alessia Matano | Paolo Naticchioni

Journal: The European Journal of Comparative Economics
ISSN 1824-2979

Volume: 8;
Issue: 2;
Start page: 265;
Date: 2011;
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Keywords: Rent Sharing | Sorting | Wage | Italy

ABSTRACT
Using a unique employer-employee panel database, we investigate the extent of rent sharing in Italy from 1996 to 2003. We derive the following findings. First, after controlling for the national bargaining level, there is robust evidence of rent sharing at firm level. Second, by means of fixed effects estimates we show that the sorting of high-ability workers into high-profit firms appears to play a substantial role, since it captures a significant amount of cross sectional estimates of rent sharing. Third, in accordance to the related literature the endogeneity of profits causes a severe underestimation of rent sharing. Our final IV estimate of the elasticity of wages with respect to profits per employee amounts to 6%, with a "Lester" range of 24%. Moreover, we point out that the impact of rent sharing is not homogeneous across several dimensions (gender, occupation, sector and macroarea).

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