International Rent Sharing in Multinational Firms

Jozef Konings, Matthew Slaughter and John Budd

No 3326, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: F23 J30 (search for similar items in EconPapers)
Date: 2002-04
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Citations: View citations in EconPapers (28)

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