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Globalised Labour Markets? International Rent Sharing across 47 Countries

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  • Martins, Pedro S.

    (Nova School of Business and Economics)

  • Yang, Yong

    (University of Essex)

Abstract

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.

Suggested Citation

  • Martins, Pedro S. & Yang, Yong, 2010. "Globalised Labour Markets? International Rent Sharing across 47 Countries," IZA Discussion Papers 5283, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5283
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    References listed on IDEAS

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    1. Yong Yang & Pedro S. Martins & Nigel Driffield, 2013. "Multinational Performance and the Geography of FDI," Management International Review, Springer, vol. 53(6), pages 763-794, December.
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    14. Pedro S. Martins & Yong Yang, 2015. "Globalized Labour Markets? International Rent Sharing Across 47 Countries," British Journal of Industrial Relations, London School of Economics, vol. 53(4), pages 664-691, December.
    15. Hijzen, Alexander & Martins, Pedro S. & Schank, Thorsten & Upward, Richard, 2013. "Foreign-owned firms around the world: A comparative analysis of wages and employment at the micro-level," European Economic Review, Elsevier, vol. 60(C), pages 170-188.
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    Cited by:

    1. Sónia Cabral & Pedro S. Martins & João Pereira dos Santos & Mariana Tavares, 2021. "Collateral Damage? Labour Market Effects of Competing with China—at Home and Abroad," Economica, London School of Economics and Political Science, vol. 88(350), pages 570-600, April.
    2. Wenjing Duan & Pedro S. Martins, 2018. "Rent sharing in China: Magnitude, heterogeneity and drivers," Working Papers 96, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    3. TANAKA Ayumu, 2015. "Wage Premiums for Exporters and Multinational Enterprises: Evidence from Japanese linked employer-employee data," Discussion papers 15106, Research Institute of Economy, Trade and Industry (RIETI).
    4. Hjort, Jonas & Li, Xuan & Sarsons, Heather, 2020. "Across-Country Wage Compression in Multinationals," CEPR Discussion Papers 14465, C.E.P.R. Discussion Papers.
    5. Michele Bernini & Jun Du & James H. Love, 2016. "Explaining intermittent exporting: Exit and conditional re-entry in export markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(9), pages 1058-1076, December.
    6. Uwe Jirjahn, 2017. "Foreign Ownership and Intra-Firm Union Density in Germany," Research Papers in Economics 2017-09, University of Trier, Department of Economics.
    7. Contractor, Farok & Yang, Yong & Gaur, Ajai S., 2016. "Firm-specific intangible assets and subsidiary profitability: The moderating role of distance, ownership strategy and subsidiary experience," Journal of World Business, Elsevier, vol. 51(6), pages 950-964.
    8. Hartmut Egger & Udo Kreickemeier, 2017. "Why Foreign Ownership May be Good for You," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 13, pages 381-421, World Scientific Publishing Co. Pte. Ltd..
    9. Pedro S. Martins & Yong Yang, 2015. "Globalized Labour Markets? International Rent Sharing Across 47 Countries," British Journal of Industrial Relations, London School of Economics, vol. 53(4), pages 664-691, December.
    10. Jonas Hjort & Xuan Li & Heather Sarsons, 2020. "Random-Coefficients Logit Demand Estimation with Zero-Valued Market Shares," Working Papers 2020-15, Becker Friedman Institute for Research In Economics.
    11. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2016. "Wages and International Tax Competition," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 893-923, November.
    12. Carluccio, Juan & Bas, Maria, 2015. "The impact of worker bargaining power on the organization of global firms," Journal of International Economics, Elsevier, vol. 96(1), pages 162-181.
    13. Dobbelaere, Sabien & Kiyota, Kozo, 2018. "Labor market imperfections, markups and productivity in multinationals and exporters," Labour Economics, Elsevier, vol. 53(C), pages 198-212.
    14. repec:ebd:wpaper:164 is not listed on IDEAS
    15. Pedro S. Martins, 2016. "Employment Resilience through Services Exports? Evidence from Matched Employer-Employee Data," Working Papers 79, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    16. Verena Dill & Uwe Jirjahn, 2014. "Foreign Owners and Perceived Job Insecurity in Germany: Evidence from Linked Employer-Employee Data," Research Papers in Economics 2014-09, University of Trier, Department of Economics.
    17. Yong Yang & Pedro S. Martins & Nigel Driffield, 2013. "Multinational Performance and the Geography of FDI," Management International Review, Springer, vol. 53(6), pages 763-794, December.
    18. Ayumu Tanaka, "undated". "Why Do Exporters and Multinational Firms Pay Higher Wages?:Evidence from Japanese Linked Employer–Employee Data," Discussion papers e-17-013, Graduate School of Economics , Kyoto University.
    19. Khadija Straaten & Niccolò Pisani & Ans Kolk, 2020. "Unraveling the MNE wage premium," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1355-1390, December.
    20. Sourafel Girma & Holger Görg & Erasmus Kersting, 2019. "Which boats are lifted by a foreign tide? Direct and indirect wage effects of foreign ownership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 923-947, August.

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    More about this item

    Keywords

    profit sharing; wage determination; multinationals;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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