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Why Foreign Ownership May Be Good For You

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  • Hartmut Egger
  • Udo Kreickemeier

Abstract

We develop a two‐country model with heterogeneous producers and rent‐sharing at the firm level. We identify two sources of a multinational wage premium: A composition effect because multinational firms are more productive, make higher profits, and pay higher wages, and a firm‐level wage effect, because a firm makes higher global profits and thus pays higher wages in its home market when becoming multinational. With two identical countries, the wage premium is fully explained by firm characteristics. Allowing for technology differences between countries, a residual wage premium exists in the technologically backward country but not in the advanced country.

Suggested Citation

  • Hartmut Egger & Udo Kreickemeier, 2013. "Why Foreign Ownership May Be Good For You," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 693-716, May.
    • Handle: RePEc:wly:iecrev:v:54:y:2013:i:2:p:693-716
    DOI: iere.12011
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    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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