Labor market imperfections, markups and productivity in multinationals and exporters

Sabien Dobbelaere, Kozo Kiyota

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper examines the links between a firm's internationalization status and the type and degree of market imperfections in product and labor markets. We develop a framework for modelling heterogeneity across firms in terms of (i) product market power (price-cost markups), (ii) labor market imperfections (workers’ bargaining power during worker-firm negotiations or a firm's degree of wage-setting power) and (iii) revenue productivity. We apply this framework to analyze whether the pricing behavior of firms in product and labor markets differs across firms that engage in different forms of internationalization using an unbalanced panel of 7,458 manufacturing firms over the period 1994-2012 in Japan. Engagement in international activities is found to matter for determining not only the type of imperfections in product and labor markets but also the degree of imperfections. Clear differences in behavior between firms that serve the foreign market either through exporting or through FDI are observed. Exporters are more likely to be characterized by imperfect competition in the product market whereas the opposite holds for multinationals. Exporters are more likely to share rents based on the bargaining power of workers whereas a firm's wage-setting power seems to generate wage dispersion across firms with foreign subsidiaries.

Original languageEnglish
Pages (from-to)198-212
Number of pages15
JournalLabour Economics
Volume53
DOIs
Publication statusPublished - Aug 2018

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Markups
Multinationals
Exporters
Productivity
Labor market imperfections
Product market
Workers
Labour market
Wage setting
Bargaining power
Internationalization
Imperfections
Unbalanced panels
Revenue
Modeling
Market power
Firm heterogeneity
Imperfect competition
Rent
Manufacturing firms

Bibliographical note

Part of special issue:
European Association of Labour Economists 29th annual conference, St.Gallen, Switzerland, 21-23 September 2017. Edited by Kristiina Huttunen

Keywords

  • exporting
  • monopsony
  • multinational firms
  • panel data
  • price-cost mark-ups
  • productivity
  • Rent sharing

Cite this

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Labor market imperfections, markups and productivity in multinationals and exporters. / Dobbelaere, Sabien; Kiyota, Kozo.

In: Labour Economics, Vol. 53, 08.2018, p. 198-212.

Research output: Contribution to JournalArticleAcademicpeer-review

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