International Rent Sharing in Multinational Firms

36 Pages Posted: 21 May 2002

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: April 2002

Abstract

We use a unique firm-level panel data set of multinational parents and their foreign affiliates to analyse 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% of observed variation in affiliate wages. These results reveal a previously ignored aspect of labour-market rent sharing. They also reveal an important micro-level linkage that can transmit economic conditions across national borders and that can provide an implicit cross-country risk-sharing mechanism.

Keywords: Profit sharing, multinational firms

JEL Classification: F23, J30

Suggested Citation

Budd, John W. and Konings, Jozef and Slaughter, Matthew J., International Rent Sharing in Multinational Firms (April 2002). CEPR Discussion Paper No. 3326. Available at SSRN: https://ssrn.com/abstract=313200

John W. Budd (Contact Author)

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

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Center for Human Resources and Labor Studies
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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

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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