Ownership, Firm Size and Rent Sharing in a Transition Country

Using a unique 3-digit firm-level data set of all medium and large manufacturing enterprises in Bulgaria covering the years 1997-1998, we investigate how wages are affected by ownership status, firm size and rent sharing. Our pooled OLS, panel and first-difference TSLS estimates clearly point to ownership structure as an important determinant of both the wage level (for given productivity) and the degree of rent sharing. Rent sharing is very pronounced in state-owned firms but far less pronounced in private domestic and foreign firms. The results strongly confirm the existence of a multinational wage premium. In addition, we find weak evidence of a positive firm size-wage effect and a positive effect of firm size on the degree of rent sharing. If these effects exist, they are often more pronounced in private domestic firms.