Do Workers Share in Firm Success? Pass-through Estimates for New Zealand

Arbeitspapier

We study the extent to which firm financial performance is passed on to workers in the form of higher wages and how this has changed over 2002-2018. We measure financial performance as value added per worker and as quasi-rents. Quasi-rents better approximate the resources available to be shared between workers and firms as the measure takes into account the rental cost of capital as well as the reservation wages. We estimate the reservation wage bill for each firm using estimates from a two-way fixed-effect model and further decompose the pass-through into contributions from worker sorting and rent-sharing. Our IV estimates of pass-through are in the range of 0.12 and 0.19 for value added and 0.11 and 0.07 for quasi-rents. Worker sorting explains between 35% and 50% of pass-through. While the extent of overall pass-through is relatively stable over time, the contribution of worker sorting declines dramatically to explain almost none of the estimated pass-through.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 14764

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Labor Discrimination ; Aggregate Factor Income Distribution ; Firm Behavior: Empirical Analysis
• Subject: wage determination ; rent sharing ; worker sorting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Allan, Corey ; Maré, David C.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/250425
• Last update: 10.03.2025, 11:41 AM CET