Rent-Sharing under Different Bargaining Regimes: Evidence from Linked Employer-Employee Data

Using Belgian linked employer-employee data, we examine how collective bargaining arrangements affect the relationship between firms' profitability and individual wages via rent-sharing. In industries where agreements are usually renegotiated at firm-level ('decentralized industries') wages and firm-level profits are positively correlated regardless of the type of collective wage agreement by which the workers are covered (industry or firm). On the other hand, where firm-level wage renegotiation is less common ('centralized industries'), wages are only significantly related to firms' profitability for workers covered by a firm-level collective agreement. Thus, industry-wide contracts that are not complemented by a firm-level collective agreement suppress the impact of firm profits on workers' wages in centralized industries. © 2011 Blackwell Publishing Ltd/London School of Economics.