International Rent Sharing in Multinational Firms

John Budd, Jozef Konings and Matthew J. Slaughter ()

Working Papers from Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus)

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 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.

JEL-codes: F23 J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind and nep-lam
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: International Rent Sharing in Multinational Firms (2002)
Working Paper: International Rent Sharing in Multinational Firms (2002)
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