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Multinational Firms and Heterogeneous Workers

  • Mario Larch
  • Wolfgang Lechthaler

In the presence of increasing specialization of workers it becomes more and more difficult for firms to find the most suitable workers. In such an environment a multinational corporation has an advantage because it can exchange workers between plants in different countries. In this way it can draw on a larger labor market pool, reducing the mismatch of its workforce. This paper analyzes the consequences of this advantage for production, employment and, most prominently, wages. We are able to disentangle the effects of worker heterogeneity and firm heterogeneity on wages and show that the latter is important to explain why multinationals typically pay higher wages

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1454.

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Length: 37 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:kie:kieliw:1454
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  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," Harvard Institute of Economic Research Working Papers 1998, Harvard - Institute of Economic Research.
  3. Andrew.B Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in international trade," LSE Research Online Documents on Economics 3682, London School of Economics and Political Science, LSE Library.
  4. Nikolaj Malchow-Møller & James R. Markusen & Bertel Schjerning, 2009. "Foreign Firms, Domestic Wages," CAM Working Papers 2009-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  5. HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, . "Wage competition with heterogeneous workers and firms," CORE Discussion Papers RP 1463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Ludema, Rodney D., 2002. "Increasing returns, multinationals and geography of preferential trade agreements," Journal of International Economics, Elsevier, vol. 56(2), pages 329-358, March.
  7. International Monetary Fund, 2004. "Trade and Industrial Location with Heterogeneous Labor," IMF Working Papers 04/103, International Monetary Fund.
  8. Gene M. Grossman & Elhanan Helpman & Adam Szeidl, 2003. "Optimal Integration Strategies for the Multinational Firm," Harvard Institute of Economic Research Working Papers 2024, Harvard - Institute of Economic Research.
  9. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  10. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
  11. Pedro S. Martins, 2004. "Do Foreign Firms Really Pay Higher Wages? : Evidence from Different Estimators," CRIEFF Discussion Papers 0409, Centre for Research into Industry, Enterprise, Finance and the Firm.
  12. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
  13. Robert C. Feenstra, 2000. "The Impact of International Trade on Wages," NBER Books, National Bureau of Economic Research, Inc, number feen00-1, July.
  14. 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.
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