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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Across-Country Wage Compression in Multinationals

Jonas Hjort, Xuan Li, Heather Sarsons

NBER Working Paper No. 26788
Issued in February 2020
NBER Program(s):Development Economics, Labor Studies

Many employers link wages at the firm’s establishments outside of the home region to the level at headquarters. Multinationals that anchor-to-the headquarters also transmit wage changes arising from shocks to minimum wages and exchange rates in the home country/state to their foreign establishments. Such multinationals fire more low-skill workers and hire fewer new workers abroad after a permanent (minimum wage-induced) foreign establishment wage increase originating in shocks to headquarter wages, but not after a temporary (exchange rate-induced) one. We show this using data on 1,060 multinationals’ establishments across the world and in employee-level data on the same employers’ establishments in Brazil.

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Document Object Identifier (DOI): 10.3386/w26788

 
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