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The Contribution Of Multinationals To Wage Inequality: Foreign Ownership And The Gender Pay Gap

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  • Priit Vahter
  • Jaan Masso

Abstract

While an abundance of studies exists documenting the significant wage premium of multinationals (MNE) and the effects of foreign direct investments (FDI) on wage inequality, much less is still known about how foreign ownership affects the gender wage gap of employees in firms. Based on employer-employee level data from Estonia – a country with the largest gender wage gap in the EU – this study highlights the regularity that foreign owned firms display on average a substantially larger gender wage gap than domestically owned firms. Among different occupation groups, this result is especially evident among managers. Furthermore, this difference is also evident if we focus on acquisitions of domestic firms by MNEs and estimate its effects based on propensity score matching. The resulting increase in gender wage gap is due to men capturing a higher wage premium from working at foreign owned firms than women, although both tend to gain in terms of wages from being employed at MNEs. We find evidence (albeit limited) suggesting that one of the explanations of the difference in the gender wage gap between foreign-owned and domestically-owned firms could potentially be that MNEs require more of a continuous commitment from their employees compared to other firms.

Suggested Citation

  • Priit Vahter & Jaan Masso, 2018. "The Contribution Of Multinationals To Wage Inequality: Foreign Ownership And The Gender Pay Gap," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 106, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  • Handle: RePEc:mtk:febawb:106
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    Cited by:

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    2. Jaan Masso & Vladyslav Soloviov & Kerly Espenberg & Inta Mierina, 2019. "Social convergence of the Baltic states within the enlarged EU: Is limited social dialogue an impediment?," Chapters, in: Daniel Vaughan-Whitehead (ed.), Towards Convergence in Europe, chapter 2, pages 35-77, Edward Elgar Publishing.
    3. C. Austin Davis & Jennifer P. Poole, . "Can multinational firms promote gender equality? The role of labour mobility," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    4. Jaerim Choi & Theresa Greaney, 2019. "Global Influences on Gender Inequality: Evidence from Female Employment in Korea," Working Papers 201908, University of Hawaii at Manoa, Department of Economics.
    5. Greaney, Theresa & Tanaka, Ayumu, 2020. "Foreign Ownership, Exporting and Gender Wage Gaps: Evidence from Japanese Linked Employer-Employee Data," MPRA Paper 101339, University Library of Munich, Germany.
    6. Endoh, Masahiro, 2021. "Offshoring and working hours adjustments in a within-firm labor market," Journal of the Japanese and International Economies, Elsevier, vol. 60(C).
    7. Magda, Iga & Salach, Katarzyna, 2019. "Gender Pay Gap Patterns in Domestic and Foreign-Owned Firms," IZA Discussion Papers 12453, Institute of Labor Economics (IZA).
    8. Jaan Masso & Priit Vahter, 2020. "Innovation As A Firm-Level Factor Of The Gender Wage Gap," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 128, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    9. Victor Stolzenburg & Marianne Matthee & Caro Janse van Rensburg & Carli Bezuidenhout, . "Foreign direct investment and gender inequality: evidence from South Africa," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    10. Henri Luomarant & Fernando Cantu & Steve MacFeely & Anu Peltola, . "The role of multinational and trading enterprises in employment and the gender pay gap: evidence from Finland," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    11. Olga Takács & János Vincze, 2020. "The gender-dependent structure of wages in Hungary: results using machine learning techniques," CERS-IE WORKING PAPERS 2044, Institute of Economics, Centre for Economic and Regional Studies.
    12. Molina, Teresa & Tanaka, Mari, 2020. "Globalization and Female Empowerment: Evidence from Myanmar," IZA Discussion Papers 13957, Institute of Labor Economics (IZA).
    13. Caro Janse van Rensburg & Carli Bezuidenhout & Marianne Matthee & Victor Stolzenburg, 2020. "Globalization and gender inequality: Evidence from South Africa," WIDER Working Paper Series wp-2020-97, World Institute for Development Economic Research (UNU-WIDER).
    14. Greaney, Theresa M. & Tanaka, Ayumu, 2021. "Foreign Ownership, Exporting and Gender Wage Gaps: Evidence from Japanese Linked Employer-Employee Data," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).
    15. Jaan Masso & Jaanika Meriküll & Priit Vahter, 2020. "The Role Of Firms In The Gender Wage Gap," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 120, Faculty of Economics and Business Administration, University of Tartu (Estonia).

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    More about this item

    Keywords

    FDI; foreign ownership; wages; gender wage gap;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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