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International trade and rent sharing among developed and developing countries

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  • Fontagne, Lionel
  • Mirza, Daniel

Abstract

How are rents from openness captured and shared among employers and employees located in different countries? In this paper, we derive a theoretical equation, based on rent sharing theories, linking industry wages to market shares held in different countries and then take it to the test. We construct a dataset that provides together trade, activity and labor related data for around 29 industries and 65 countries between 1981 and 1997. We find, for OECD countries, that an increase in sales on national markets or exports to other rich countries is associated with growth in wages in roughly one third to one half of the industries. Among developing countries however, the evidence is weaker. Such phenomenon of rent-sharing can be observed in Latin America and within Mediterranean countries but only when selling to their domestic market. Producers in these group of countries and Asia, appear however, to be unable to extract rents and redistribute them whenever they export to rich countries.
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  • Fontagne, Lionel & Mirza, Daniel, 2007. "International trade and rent sharing among developed and developing countries," Economic Modelling, Elsevier, vol. 24(3), pages 523-558, May.
  • Handle: RePEc:eee:ecmode:v:24:y:2007:i:3:p:523-558
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    1. Persyn, Damiaan, 2008. "Trade as a Wage Disciplining Device," IZA Discussion Papers 3786, Institute for the Study of Labor (IZA).

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