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MNEs and wages: The role of productivity spillovers and imperfect labor markets

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  • Saglam, Bahar Bayraktar
  • Sayek, Selin

Abstract

Disentangling the labor market implications of increased foreign capital flows remains important. This paper provides a unifying framework allowing to study the wage implications of multinational enterprise (MNE) activities, pointing to the importance of controlling for both labor market imperfections and productivity spillovers from foreign to local firms. Results show that increased MNE activities increase average wages in the local economy while contributing to a larger wage dispersion between the MNE and local firms. While the results pertaining to average wages depends heavily on the frictions in the labor market, how much the wage dispersion alters also depends on the extent of productivity spillovers from the MNEs to the local firms and the complementarity between domestic and foreign capital.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 6 ()
Pages: 2736-2742

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2736-2742

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: FDI spillovers; Wage spillovers; Imperfect labor markets; Firm wage premium; Wage dispersion;

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  1. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
  2. Areendam Chanda & Laura Alfaro & Sebnem Kalemli-Ozcan & Selin Sayek, . "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," Departmental Working Papers 2006-13, Department of Economics, Louisiana State University.
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