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Globalized Labour Markets? International Rent Sharing Across 47 Countries

Listed author(s):
  • Pedro S. Martins
  • Yong Yang

We present evidence about the role of rent sharing in fostering the interdependence of labour markets around the world. Our results draw on a firm-level panel of more than 2,000 multinationals and more than 5,000 of their affiliates, covering 47 home and host countries. We find considerable evidence that multinationals share profits internationally, by paying higher wages to their workers in foreign affiliates in periods of higher profits. This occurs even across continents, and not only within Europe, as shown in earlier research. The results are robust to different tests, including a falsification exercise based on 'matched' parents. Finally, we show that different measures of the heterogeneity between parents and affiliates tend to increase rent sharing while the number of affiliates tends to decrease rent sharing, results we argue are consistent with bargaining views.

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File URL: http://hdl.handle.net/10.1111/bjir.12050
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Article provided by London School of Economics in its journal British Journal of Industrial Relations.

Volume (Year): 53 (2015)
Issue (Month): 4 (December)
Pages: 664-691

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Handle: RePEc:bla:brjirl:v:53:y:2015:i:4:p:664-691
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  1. John Van Reenen, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U. K. Companies," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 195-226.
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