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Across-Country Wage Compression in Multinationals

Author

Listed:
  • Jonas Hjort
  • Xuan Li
  • Heather Sarsons

Abstract

Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals' establishments across the world and linked employee-level data on their establishments in Brazil. Headquarters wage changes arising from minimum wage and exchange rate shocks are partially transmitted to workers employed in the same position abroad. Wage change transmission appears to be direct and results from firm-wide wage-setting procedures rather than associated technology or employment changes. "Anchored" wage setting is somewhat associated with particular characteristics of the job × employer × headquarters-establishment country-pair.

Suggested Citation

  • Jonas Hjort & Xuan Li & Heather Sarsons, 2026. "Across-Country Wage Compression in Multinationals," American Economic Review, American Economic Association, vol. 116(1), pages 52-87, January.
    • Handle: RePEc:aea:aecrev:v:116:y:2026:i:1:p:52-87
    DOI: 10.1257/aer.20200042
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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