International Rent Sharing in Multinational Firms

33 Pages Posted: 28 Feb 2002 Last revised: 26 Oct 2010

See all articles by John W. Budd

John W. Budd

University of Minnesota - Twin Cities - Carlson School of Management

Jozef Konings

Catholic University of Leuven (KUL) - LICOS - Centrum voor Transitie-economie; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Matthew J. Slaughter

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: February 2002

Abstract

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.

Suggested Citation

Budd, John W. and Konings, Jozef and Slaughter, Matthew J., International Rent Sharing in Multinational Firms (February 2002). NBER Working Paper No. w8809. Available at SSRN: https://ssrn.com/abstract=302570

John W. Budd

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
Center for Human Resources and Labor Studies
Minneapolis, MN 55455
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612-624-8360 (Fax)

HOME PAGE: http://www.johnwbudd.com

Jozef Konings

Catholic University of Leuven (KUL) - LICOS - Centrum voor Transitie-economie ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium
+32 16 326 589 (Phone)
+32 16 326 599 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matthew J. Slaughter (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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