Rent Sharing and Inclusive Growth

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The long-run evolution of rent sharing is studied. Based upon a comprehensive and harmonized panel of the top 300 publicly quoted British companies over thirty-five years, the paper reports evidence of a significant fall over time in the extent to which firms share rents with workers. It confirms that companies do share their profits with employees, but at a much smaller scale today than they did during the 1980s and 1990s. This is a robust finding, corroborated with industry-level analysis for the US and EU. The temporal decline in rent sharing is coincident with rising product market power. Whilst it was the case that firms with more market power previously shared more of their profits, they experienced stronger falls in rent sharing after 2000.