Compensation Structure and Product Market Competition / John M. Abowd, Laurence Allain.

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Abowd, John M

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5493.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the wage equations (derived from Abowd, Kramarz and Margolis 1994). We then make direct calculations of the quasi-rent per worker at each firm and the conditions within that firm's product market, as measured by international prices, using a representative sample of private French firms. We find that quasi- rents per worker are only mildly related to the structure of the French product market. The systematic variation in our quasi-rents is related to international market prices and work force structure, however, producing an estimate of bargaining power for the employees of about 0.4. This estimate, while slightly larger than other estimates, may be quite reasonable for the workers in an economy in which the vast majority of jobs are covered by industry-level collective bargaining agreements.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
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Previous	nber w5490 Costly Pollution Abatement, Competitiveness, and Plant Location Decisions /	nber w5491 "Globalization and Inequality Past and Present" /	nber w5492 Cross-State Variation in Medicaid Programs and Female Labor Supply /	nber w5493 Compensation Structure and Product Market Competition /	nber w5494 Determinants of Privatization Prices /	nber w5495 Explaining Domestic Content: Evidence from Japanese and U.S. Auto Production in the U.S. /	nber w5496 Rational Capital Budgeting in an Irrational World /	Next

March 1996.

The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the wage equations (derived from Abowd, Kramarz and Margolis 1994). We then make direct calculations of the quasi-rent per worker at each firm and the conditions within that firm's product market, as measured by international prices, using a representative sample of private French firms. We find that quasi- rents per worker are only mildly related to the structure of the French product market. The systematic variation in our quasi-rents is related to international market prices and work force structure, however, producing an estimate of bargaining power for the employees of about 0.4. This estimate, while slightly larger than other estimates, may be quite reasonable for the workers in an economy in which the vast majority of jobs are covered by industry-level collective bargaining agreements.