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Are Profits Shared Across Borders? Evidence on International Rent Sharing

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  • John W. Budd
  • Matthew J.Slaughter

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.

Suggested Citation

  • John W. Budd & Matthew J.Slaughter, 2000. "Are Profits Shared Across Borders? Evidence on International Rent Sharing," NBER Working Papers 8014, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8014
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    Cited by:

    1. Maria Bas & Juan Carluccio, 2009. "Wage Bargaining and the Boundaries of the Multinational Firm," CEP Discussion Papers dp0963, Centre for Economic Performance, LSE.
    2. John W. Budd & Jozef Konings & Matthew J. Slaughter, "undated". "International Rent Sharing in Multinational Firms," Working Papers 0202, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
    3. Lionel Fontagné & Daniel Mirza, 2001. "International Trade and Rent Sharing in Developed and Developing countries," Working Papers 2001-09, CEPII research center.
    4. W. Jos Jansen & Ad C. J. Stokman, 2006. "International Rent Sharing and Domestic Labour Markets: A Macroeconomic Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(4), pages 792-813, December.
    5. R. Alison Felix & James R. Hines, Jr., 2009. "Corporate Taxes and Union Wages in the United States," NBER Working Papers 15263, National Bureau of Economic Research, Inc.
    6. Sebnem Kalemli-Ozcan & Ariell Reshef & Bent E Sørensen & Oved Yosha, 2010. "Why Does Capital Flow to Rich States?," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 769-783, November.
    7. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2016. "Wages and International Tax Competition," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 893-923, November.
    8. W.Jos Jansen & Ad C.J.Stokman, 2003. "Foreign Direct Investment and International Business Cycle Comovement," MEB Series (discontinued) 2003-10, Netherlands Central Bank, Monetary and Economic Policy Department.
    9. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 17, pages 623-687 World Scientific Publishing Co. Pte. Ltd..
    10. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
    11. Ellen Brock & Sabien Dobbelaere, 2006. "Has International Trade Affected Workers’ Bargaining Power?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 233-266, July.
    12. Sorensen, Bent E. & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2007. "Home bias and international risk sharing: Twin puzzles separated at birth," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 587-605, June.
    13. Philip Du Caju & François Rycx & Ilan Tojerow, 2011. "Wage Structure Effects of International Trade: Evidence from a Small Open Economy," Working Papers CEB 11-011, ULB -- Universite Libre de Bruxelles.
    14. W.J. Jansen & A.C.J. Stokman, 2002. "The Importance of Multinational Companies for Global Economic Linkages," WO Research Memoranda (discontinued) 720, Netherlands Central Bank, Research Department.
    15. Jos Jansen & Ad Stokman, 2011. "International Business Cycle Comovement: Trade and Foreign Direct Investment," DNB Working Papers 319, Netherlands Central Bank, Research Department.
    16. Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November.
    17. S. Dobbelaere, 2003. "Ownership, Firm Size and Rent Sharing in a Transition Country," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/170, Ghent University, Faculty of Economics and Business Administration.
    18. Dobbelaere, Sabien, 2004. "Ownership, firm size and rent sharing in Bulgaria," Labour Economics, Elsevier, vol. 11(2), pages 165-189, April.
    19. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2005. "Wages and International Rent Sharing in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 73-84, February.
    20. Linda S. Goldberg, 2007. "Financial sector FDI and host countries: new and old lessons," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 1-17.
    21. Harrison, Ann E. & McMillan, Margaret S., 2006. "Dispelling Some Myths About Offshoring," MPRA Paper 15615, University Library of Munich, Germany.
    22. Maria Bas, 2012. "Foreign ownership wage premium: Does financial health matter?," Working Papers 2012-24, CEPII research center.
    23. Majumdar, Sumit K., 2010. "Institutional changes, firm size and wages in the telecommunications sector," Information Economics and Policy, Elsevier, vol. 22(3), pages 201-217, July.
    24. Verena Dill & Uwe Jirjahn, 2013. "Foreign Owners and the Quality of Industrial Relations in Germany," Research Papers in Economics 2013-07, University of Trier, Department of Economics.
    25. Harrison, Ann & McMillan, Margaret S. & Null, Clair, 2006. "US multinational activity abroad and US jobs: substitutes or complements?," MPRA Paper 36277, University Library of Munich, Germany.

    More about this item

    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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