Illustration for EconPol Working Paper 19

International Competition and Rent Sharing in French Manufacturing: A Firm-Level Analysis

Working Paper
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A new working paper from EconPol Europe investigates the impact of import competition on rent sharing between firms and employees using a large panel of French manufacturing firms. By applying recent advances in the estimation of price-costs margins, authors classify each firm into labour- and product-market regimes based on the presence or absence of market power and estimate the degree of rent sharing among firms and workers. They investigate the hypothesis that import penetration acts as a discipline device on the labour market, reducing workers' bargaining power. Competition from OECD countries has a negative effect on bargaining power, they find, whereas imports from low-wage countries have a more muted impact. By providing firm-level evidence for the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalisation on the labour market.