Rent‐sharing and Collective Bargaining Coverage: Evidence from Linked Employer–Employee Data

Abstract

Using a linked employer–employee dataset, this paper analyses the relationship between firm profitability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to firm‐specific rents varies with collective bargaining coverage. To address this issue, we distinguish sector‐ and firm‐specific wage agreements and wage determination without any bargaining coverage. Our findings indicate that individual wages are positively related to firm‐specific quasi‐rents in the non‐union sector and under firm‐specific contracts. Industry‐wide wage contracts, however, are associated with a significantly lower responsiveness of wages to firm‐level profitability.