International Rent Sharing and Domestic Labor Markets: A Macroeconomic Analysis

W. Jos Jansen () and A.C.J. Stokman ()

Macroeconomics from EconWPA

Abstract: Foreign-owned firms account for a significant part of output in many industrialized countries. However, compared to international trade linkages, relatively little is known about the role of foreign direct investment linkages and multinational firm behavior in the transmission of disturbances from one country to the next. Inspired by the micro- evidence on profit sharing within multinational corporations and within industries, we investigate whether a cross-border rent sharing phenomenom can be identified at the macro-level. The rent sharing hypothesis implies that an increase in foreign profitability should boost wages and/or employment in the domestic economy. Our empirical study provides evidence that international rent sharing might be an important aspect of global economic linkages. In four continental European countries and the UK, labour market conditions (wages and/or employment) are significantly affected by profitability conditions abroad. By contrast, the US labour market does not appear to be sensitive to changes in profitability in other countries, which could be explained by the still relatively modest role of foreign-owned capital in the US economy.

Keywords: foreign direct investment; international rent sharing; labour markets; international linkages; spillovers (search for similar items in EconPapers)
JEL-codes: E32 F21 J23 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2003-12-24
Note: Type of Document - pdf; prepared on PC Win98; to print on A4 page format; pages: 28; figures: within document
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Related works:
Working Paper: International Rent Sharing and Domestic Labour Markets: A Macroeconomic Analysis (2003)
Working Paper: International rent sharing and domestic labour markets: a macroeconomic analaysis (2003)
Journal Article: International Rent Sharing and Domestic Labour Markets: A Macroeconomic Analysis (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0312008

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