Rent sharing in Portuguese banking

Abstract

Using a fixed effects estimator and a dynamic panel data system-generalized method of moments estimator on a sample of 77 banks, covering the period 1988–2005, in this paper we estimate how wages in the Portuguese banking sector depend on the employers' ability to pay. The results indicate that wages are strongly positively correlated with rents even after controlling for firm and workforce characteristics. A conservative Lester's range of wages due to rent sharing is around 56 per cent of the mean wage of the Portuguese banking sector, a number that is considerably larger than in previous studies.