Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 172: Wages, Profits and Individual Unemployment Risk : Evidence from Matched Worker-Firm Data

Mahmood Arai and Fredrik Heyman
Additional contact information
Mahmood Arai: FIEF and Department of Economics, Stockholm University, Postal: SE-106 91 Stockholm, Sweden
Fredrik Heyman: Trade Union Institute for Economic Research, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden

Abstract: We present new evidence on the extent of rent sharing based on a large panel of matched worker-firm data for Sweden. Controlling for worker and firm heterogeneity, as well as examining the problem of endogeneity of profits, we report evidence implying the existence of rent sharing. Another result is that unemployment risk, aggregated at the firm and various industry levels, has a negative effect on individual workers' wages after controlling for individual differences in unemployment risk.

Keywords: Wages; Profits; Rent-Sharing; Wage-curve

JEL-codes: D31; J31

27 pages, December 13, 2001

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