← Search

Wages and International Rent Sharing in Multinational Firms

John W. Budd1; Jozef Konings2; Matthew J. Slaughter3,4

1 Work and Organizations · 2 KU Leuven · 3 Dartmouth College · 4 Dartmouth Hospital

The Review of Economics and Statistics 2005

We use a unique firm-level panel data set of multinational parents and their foreign affiliates to analyze whether profits are shared across borders within multinational firms. Using both fixed-effects and generalized method-of-moments estimators, affiliate wage levels are estimated to respond to both affiliate and parent profitability. The elasticity of affiliate wages to parent profits per worker is approximately 0.03, which can explain over 20 percent of the observed variation in affiliate wages. These results reveal a previously ignored aspect of labor-market rent sharing. They also reveal an important micro-level linkage with potential macro-level implications. International rent sharing can transmit economic conditions across national borders, and can thereby provide an implicit cross-country risk-sharing mechanism.

DOI
10.1162/0034653053327586
Volume
87 (1)
Pages
73-84
Language
en
Export
BibTeX
Sources
openalex crossref