Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 07-5: My Pay is Too Bad (I Quit). Your Pay is Too Good (You're Fired)

Johan Moritz Kuhn ()
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Johan Moritz Kuhn: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Abstract: This paper is about how surpluses of labour contracts are shared by the employee and her firm. For this purpose, I look at the relationship between individual wages and employeremployee separation patterns. The paper suggests a model which estimates (otherwise unobserved) alternative wage and individual productivity measures from matched employer-employee data. These estimates can be used to address rent sharing hypotheses. Results of an application of the model to a large Danish register data set suggest that firms appropriate large shares of the returns to tenure. There is no evidence of gender discrimination with respect to rent sharing, and no evidence of rent sharing coefficients being different across regions which are distinguished by their labour market thickness.

Keywords: employer-employee separations; rent sharing

JEL-codes: J31; J60

39 pages, January 1, 2007

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