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Globalised Labour Markets? International Rent Sharing across 47 Countries

  • Martins, Pedro S.


    (Queen Mary, University of London)

  • Yang, Yong


    (University of Essex)

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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5283.

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Length: 36 pages
Date of creation: Oct 2010
Date of revision:
Publication status: published in: British Journal of Industrial Relations, 2014, [Online First]
Handle: RePEc:iza:izadps:dp5283
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  1. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February.
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