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Are Profits Shared Across Borders? Evidence on International Rent Sharing

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Author Info
John W. Budd
Matthew J.Slaughter

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Abstract

In the literature on rent sharing in the labor market, many studies have documented a robustly positive correlation between wages for various micro-units firms, individuals, union-firm bargaining units with profits per worker at the level of that micro-unit's industry, where industry profits are interpreted as prosperity in the product market enjoyed by firms and available for sharing with workers. But these industry studies delineate product markets by the same country as that of the micro-units, and this implicitly closed-economy perspective may miss important international aspects of wage setting. In this paper we examine how profit sharing may be conditioned by the international linkages which help shape economic openness, by analyzing negotiated contract wages for a sample of over 1000 Canadian labor contracts spanning all manufacturing from 1980 through 1992. Our central finding is that the relevant measure of product-market prosperity, and thus the pattern of rent or profit sharing, varies significantly across international linkages including multinational ownership, union type, and trade barriers. There seems to be international rent sharing, with profit sharing across borders conditioned by institutions at both the firm and industry level.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8014.

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Date of creation: Nov 2000
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Handle: RePEc:nbr:nberwo:8014

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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    Other versions:
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    Other versions:
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  18. Altonji, Joseph G & Ham, John C, 1990. "Variation in Employment Growth in Canada: The Role of External, National, Regional, and Industrial Factors," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S198-236, January. [Downloadable!] (restricted)
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  19. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc. [Downloadable!]
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