Wages and International Rent Sharing in Multinational Firms

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

No 522, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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.

Keywords: Wages; Profit Sharing; Multinational Firms (search for similar items in EconPapers)
JEL-codes: F23 J30 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2002-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Wages and International Rent Sharing in Multinational Firms (2005)
Working Paper: Wages and International Rent Sharing in Multinational Firms (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2002-522

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