Are Profits Shared Across Borders? Evidence on International Rent Sharing

Budd, John W.; Slaughter, Matthew J.

doi:10.3386/w8014

Cited by 26 publications

(43 citation statements)

References 15 publications

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“…Even rent sharing across borders appears to play a role within multinational enterprises (Budd and Slaughter, 2004). While this reflects the desire to use organizational capabilities worldwide as a source of competitive advantage, the personnel policy of foreign owners may involve tensions with the cultural and institutional context of the host country (Kostova and Roth, 2002).…”

Section: The Interaction With Foreign Ownersmentioning

confidence: 99%

Non-union worker representation, foreign owners, and the performance of establishments

Jirjahn

Mueller

2012

Oxford Economic Papers

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Using German establishment data, this study provides the first econometric analysis on the interaction of establishment-level codetermination and foreign owners. Works councils are associated with higher productivity in domestic-owned establishments while they are associated with lower productivity in foreign-owned establishments. Our results conform to the notion that foreign ownership can involve strong tensions with the institutional patterns of the host country.JEL classifications: J53, J54, M54.

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Section: The Interaction With Foreign Ownersmentioning

confidence: 99%

Non-union worker representation, foreign owners, and the performance of establishments

Jirjahn

Mueller

2012

Oxford Economic Papers

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“…2 With the exception of Budd and Slaughter (2000), however, this rentsharing literature has an explicitly domestic focus: industry, firm, or establishment wages in a specific country are regressed on profit measures for operations in that same country. Yet with increased globalization, this implicitly closed-economy perspective may miss important international aspects of wage setting.…”

Section: Introductionmentioning

confidence: 99%

Wages and International Rent Sharing in Multinational Firms

Budd¹,

Konings²,

Slaughter³

2005

Review of Economics and Statistics

188

168

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We use a unique firm-level panel data set of multinational parents and their foreign affiliates to analyze whether profits are shared across borders within multinational firms. Using both fixed-effects and generalized method-of-moments estimators, affiliate wage levels are estimated to respond to both affiliate and parent profitability. The elasticity of affiliate wages to parent profits per worker is approximately 0.03, which can explain over 20 percent of the observed variation in affiliate wages. These results reveal a previously ignored aspect of labormarket rent sharing. They also reveal an important micro-level linkage with potential macrolevel implications. International rent sharing can transmit economic conditions across national borders, and can thereby provide an implicit cross-country risk-sharing mechanism.

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“…However, Slaughter's (2001) study shows that the rising elasticity of demand for unskilled labor cannot be easily linked to different measures of globalization. Budd and Slaughter (2000) show that union wage determination in Canada is affected by changing profits in both Canada and the United States. Their work suggests that globalization does affect union wages, although they do not test for the impact on labor shares or for the impact on non-unionized workers.…”

mentioning

confidence: 99%

U.S. Multinational Activity Abroad and U.S. Jobs: Substitutes or Complements?

Harrison

McMillan

Null

2007

Industrial Relations

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Critics of globalization claim that firms are being driven by the prospects of cheaper labor and lower labor standards to shift employment abroad. Yet the evidence, beyond anecdotes, is slim. This paper reports stylized facts on the activities of U.S. multinationals at home and abroad for the years 1977 to 1999. We focus on firms in manufacturing and services, two sectors that have received extensive media attention for supposedly exporting jobs. Using firm‐level data collected by the Bureau of Economic Analysis (BEA) in Washington, D.C., we report correlations between U.S. multinational employment at home and abroad. Preliminary evidence based on the operations of these multinationals suggests that the sign of the correlation depends on the crucial distinction between affiliates in high‐income and low‐income countries. For affiliates in high‐income countries there is a positive correlation between jobs at home and abroad, suggesting that foreign employment of U.S. multinationals is complementary to domestic employment. For firms that operate in developing countries, employment has been cut in the United States, and affiliate employment has increased. To account for firm size, substitution across firms and entry and exit, we aggregate our data to the industry level. This exercise reveals that the observed “complementarity” between U.S. and foreign jobs has been driven largely by a contraction across all manufacturing sectors. It also reveals that foreign employment in developing countries has substituted for U.S. employment in several highly visible industries, including computers, electronics, and transportation. The fact that there were U.S. jobs lost to foreign affiliates in key sectors, despite broad complementarity in hiring and firing decisions between U.S. parents and their affiliates, helps explain why economists view the impact of globalization on U.S. jobs as benign despite negative news coverage for declining industries.

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Are Profits Shared Across Borders? Evidence on International Rent Sharing

Cited by 26 publications

References 15 publications

Non-union worker representation, foreign owners, and the performance of establishments

Non-union worker representation, foreign owners, and the performance of establishments

Wages and International Rent Sharing in Multinational Firms

U.S. Multinational Activity Abroad and U.S. Jobs: Substitutes or Complements?

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