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International Rent Sharing and Domestic Labour Markets: A Macroeconomic Analysis

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Abstract

Compared to international trade relations relatively little is known about the role foreign direct investment linkages play in the transmission of disturbances from one country to the next. Inspired by the microevidence on profit sharing within multinational corporations and within industries, we investigate for six countries whether a cross-border rent-sharing phenomenon can be identified at the macroeconomic level. The rent-sharing hypothesis implies that an increase in foreign profitability should boost wages and/or employment in the domestic economy. We find corroborative evidence for Belgium, France, Germany, the Netherlands and the United Kingdom. US labour market conditions, by contrast, are not affected by changes in profitability in other countries.

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Author information

Authors and Affiliations

  1. Ministry of Social Affairs and Employment, The Hague, The Netherlands

    W. Jos Jansen

  2. Economics and Research Division, De Nederlandsche Bank, P.O. Box 98, 1000 AB, Amsterdam, The Netherlands

    Ad C. J. Stokman

Authors
  1. W. Jos Jansen
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  2. Ad C. J. Stokman
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Corresponding author

Correspondence to Ad C. J. Stokman.

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JEL no.

E32, F23, F40, J23, J31

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Jansen, W., Stokman, A. International Rent Sharing and Domestic Labour Markets: A Macroeconomic Analysis. Rev. World Econ. 142, 792–813 (2006). https://doi.org/10.1007/s10290-006-0093-5

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  • DOI: https://doi.org/10.1007/s10290-006-0093-5

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