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Globalized Labour Markets? International Rent Sharing Across 47 Countries
Author(s) -
Martins Pedro S.,
Yang Yong
Publication year - 2015
Publication title -
british journal of industrial relations
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.665
H-Index - 70
eISSN - 1467-8543
pISSN - 0007-1080
DOI - 10.1111/bjir.12050
Subject(s) - labour economics , economics , collective bargaining , business , international trade , international economics
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 E urope, 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.