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Globalised labour markets? International rent sharing across 47 countries

journal contribution
posted on 2023-06-09, 02:27 authored by Pedro Martins, Yong Yang
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 over 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 headquarter 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 rent sharing is higher when the affiliate is located in countries with specific relative characteristics, such as lower economic development or taxation, while it falls with the number of affiliates. We argue that these results are consistent with transfer pricing and bargaining views.

History

Publication status

  • Published

File Version

  • Published version

Journal

British Journal of Industrial Relations

ISSN

0007-1080

Publisher

Wiley

Issue

4

Volume

53

Page range

664-691

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2016-08-10

First Compliant Deposit (FCD) Date

2021-03-05

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