Identifying rent-sharing using firms' energy input mix / Matthias Mertens, Steffen Müller, Georg Neuschäffer ; editor: Halle Institute for Economic Research (IWH) - Member of the Leibniz Association

Abstract

We present causal evidence on the rent-sharing elasticity of German manufacturing firms. We develop a new firm-level Bartik instrument for firm rents that combines the firms' predetermined energy input mix with national energy carrier price changes. Instrumental variable estimation yields a rent-sharing elasticity of approximately 0.20 implying that a 10 percent change in rents leads to a 2 percent change in wages. Rent-sharing induced by energy price variation is asymmetric and driven by energy price increases, such that, on average, workers do not benefit from energy price reductions but are harmed by price increases. Reduced-form evidence shows that a 10 percent increase in firm-level energy prices depresses firm-level wage growth by 0.34 percent.