Wages and international rent sharing in multinational firms

John W. Budd, Jozef Konings, Matthew J. Slaughter

Research output: Contribution to journalArticle

84 Citations (Scopus)

Abstract

We use a unique firm-level panel of multinational parents and their foreign affiliates to analyze whether profits are shared across borders within multinational firms. Affiliate wages 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 rent sharing. They also reveal an important micro-level linkage with potential macro-level implications. International rent sharing can transmit economic conditions across countries, and can thereby provide an implicit risk-sharing mechanism.

Original languageEnglish
Pages (from-to)73-84
Number of pages12
JournalReview of Economics and Statistics
Volume87
Issue number1
DOIs
Publication statusPublished - Feb 2005
Externally publishedYes

Fingerprint

rent
wage
parents
firm
profit
macro level
micro level
profitability
worker
economics
Multinational firms
Wages
Rent sharing
Profit
Elasticity
Profitability
Economic conditions
Multinationals
Linkage
Foreign affiliates

ASJC Scopus subject areas

  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

Wages and international rent sharing in multinational firms. / Budd, John W.; Konings, Jozef; Slaughter, Matthew J.

In: Review of Economics and Statistics, Vol. 87, No. 1, 02.2005, p. 73-84.

Research output: Contribution to journalArticle

Budd, John W. ; Konings, Jozef ; Slaughter, Matthew J. / Wages and international rent sharing in multinational firms. In: Review of Economics and Statistics. 2005 ; Vol. 87, No. 1. pp. 73-84.
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