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Multinational Enterprises and Corporate Labor Share

Daisuke Adachi¹; Yukiko Saito²

¹ Aarhus University and RIETI · ² Waseda University and RIETI

Abstract This study analyzes how multinational enterprises (MNEs) influence corporate labor share in their home countries, using the 2011 Thailand Floods as a natural experiment. Flood-related disruptions to Thai subsidiaries of Japanese MNEs generated a negative foreign productivity shock that raised labor share in Japan. We interpret this pattern using a model with international factor substitution and estimate the elasticity of substitution between domestic labor and foreign inputs using an instrument based on flood exposure. The estimated model quantifies the long-run e!ect of Thai productivity growth on Japan's labor share, indicating that expanding global production networks can shift labor–capital balances.

DOI

10.1162/rest.a.1685

Pages

1-48

Language

en

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