This paper suggests a new test for rent-sharing in the U.S. labor market. Using an unbalanced panel from the manufacturing sector, it shows that a rise in a sector's profitability leads after some years to an increase in the long-run level of wages in that sector. The paper controls for workers'...

The microeconomic forces that influence real wages are not fully understood. This paper studies pay determination using data on approximately 600 labor contracts. It finds that the real wage is an increasing function of past profitability in the employer's industry and a decreasing function of...