Micro-evidence on product and labor market regime differences between Chile and France
Sabien Dobbelaere, Rodolfo Lauterbach & Jacques Mairesse
#2015-030
Institutions, social norms and the nature of industrial relations vary
greatly between Latin American and Western European countries. Such
institutional and organizational differences might shape firms'
operational environment in general and the type of competition in
product and labor markets in particular. Contributing to the literature
on estimating simultaneously product and labor market imperfections,
this paper quantifies industry differences in both types of
imperfections using firm-level data in Chile - a non-OECD member under
the considered time period - and France. We rely on two extensions of
Hall's econometric framework for estimating price-cost margins by
nesting three labor market settings (perfect competition or
right-to-manage bargaining, efficient bargaining and monopsony). Using
an unbalanced panel of 1,737 firms over the period 1996-2003 in Chile
containing unique data on firm-level output price indices and 14,270
firms over the period 1994-2001 in France, we first classify 20
comparable manufacturing industries in 6 distinct regimes that differ in
the type of competition prevailing in product and labor markets. We then
investigate industry differences in the estimated product and labor
market imperfections. Consistent with differences in institutions and in
the industrial relations system in the two countries, we find important
regime differences across the two countries. In addition, we observe
cross-country differences in the levels of product and labor market
imperfections within regimes.
JEL Classification: C23, D21, J51, L13.
Keywords: Rent sharing, monopsony, price-cost mark-ups, production
function, panel data