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Multinational companies and wage inequality in the host country: the case of Ireland

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  • Figini, Paolo
  • Görg, Holger

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 Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 2344.

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Date of creation: 1999
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Handle: RePEc:zbw:ifwkie:2344

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  1. Barry, Frank & Bradley, John, 1997. "FDI and Trade: The Irish Host-Country Experience," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1798-1811, November.
  2. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(468), pages 163-87, January.
  3. Paolo Figini & Holger Görg, 1999. "Multinational companies and wage inequality in the host country: The case of Ireland," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 135(4), pages 594-612, December.
  4. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, Elsevier, vol. 42(3-4), pages 371-393, May.
  5. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
  6. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(441), pages 297-321, March.
  7. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 92(1), pages 1-16, February.
  8. Markusen, James R. & Venables, Anthony, 1996. "The role of multinational firms in the wage-gap debate," Discussion Papers, Series II 322, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  9. 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.
  10. 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.
  11. Stephen Machin & Annette Ryan & John Van Reenen, 1996. "Technology and changes in skill structure: Evidence from an international panel of industries," IFS Working Papers, Institute for Fiscal Studies W96/06, Institute for Fiscal Studies.
  12. 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, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n770598, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  13. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, Elsevier, vol. 36(1), pages 137-155, January.
  14. Breusch, T.S. & Pagan, A.R., . "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP -412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1991. "On the Labor Market Effects of Immigration and Trade," NBER Working Papers 3761, National Bureau of Economic Research, Inc.
  16. Hakura, D. & Deardorff, A.V., 1993. "Trade and Wages: What Are the Questions?," Working Papers, Research Seminar in International Economics, University of Michigan 341, Research Seminar in International Economics, University of Michigan.
  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, MIT Press, vol. 109(2), pages 367-97, May.
  18. 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.
  19. Das, Sanghamitra, 1987. "Externalities, and technology transfer through multinational corporations A theoretical analysis," Journal of International Economics, Elsevier, Elsevier, vol. 22(1-2), pages 171-182, February.
  20. 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.
  21. repec:sae:niesru:v:166:y::i:1:p:78-86 is not listed on IDEAS
  22. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198290155, October.
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