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Multinational Companies and Wage Inequality in the Host Country: The Case of Ireland

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  • Paolo Figini
  • Holger Görg

Abstract

In this paper, we analyse the effects of multinational companies on wage inequality in the host country, studying the case of the Irish economy. Based on a model developed by Aghion and Howitt (1998), in which the introduction of new technologies leads to increasing demand for skilled labour and, therefore, to rising inequality, we conduct an econometric study using data for the Irish manufacturing sector between 1979 and 1995. We examine inequality between wages for skilled and unskilled labour within the same manufacturing sector. Our results indicate that there is an inverted-U relationship between wage inequality and the presence of multinationals, i.e., with increasing presence of multinationals, wage inequality first increases, reaches a maximum and decreases eventually, ceteris paribus.

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Bibliographic Info

Paper provided by Trinity College Dublin, Department of Economics in its series Economics Technical Papers with number 9816.

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Date of creation: 1998
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Handle: RePEc:tcd:tcduet:9816

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Web page: http://www.tcd.ie/Economics/
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  1. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
  2. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  3. Stephen Machin & Annette Ryan & John Van Reenen, 1996. "Technology and changes in skill structure: Evidence from an international panel of industries," IFS Working Papers W96/06, Institute for Fiscal Studies.
  4. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June.
  5. Figini, Paolo & Görg, Holger, 1999. "Multinational companies and wage inequality in the host country: the case of Ireland," Open Access Publications from Kiel Institute for the World Economy 2344, Kiel Institute for the World Economy (IfW).
  6. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, September.
  7. Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
  8. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
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  15. repec:sae:niesru:v:166:y::i:1:p:78-86 is not listed on IDEAS
  16. Gerry Boyle; & Pauline McCormack, 1998. "Trade and Technological Explanations for Changes in Sectoral Labour Demand in OECD Economies," Economics, Finance and Accounting Department Working Paper Series n770598, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  17. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  18. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
  19. Das, Sanghamitra, 1987. "Externalities, and technology transfer through multinational corporations A theoretical analysis," Journal of International Economics, Elsevier, vol. 22(1-2), pages 171-182, February.
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  22. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
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