Konferenzbeitrag

Why Foreign Ownership May be Good for You

We develop a general equilibrium two-country model with heterogeneous producers, self-selection of only the most productive firms into multinational activity and rent sharing at the firm level due to fairness preferences of workers. In this setting, we identify two major sources of a multinational wage premium. On the one hand, there is a pure composition effect, because multinational firms on average make higher profits, and therefore pay higher wages as well. Since rent sharing relates to a firm's global profits, there is in addition a firm-level wage effect: A multinational firm pays higher wages in its home market than an otherwise identical firm that chooses not to become multinational. We study in detail how these two sources interact in determining the multinational wage premium. In addition, we extend our model to one with technology differences between the two economies and analyse to what extent the multinational wage premium is governed by country-specific factors.

Language
Englisch

Bibliographic citation
Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Foreign Direct Investment, Employment and Wages ; No. B4-V3

Classification
Wirtschaft
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Economic Integration
Trade and Labor Market Interactions
Subject
Multinational Firms
Wage Premium
Heterogeneous Firms

Event
Geistige Schöpfung
(who)
Kreickemeier, Udo
Egger, Hartmut
Event
Veröffentlichung
(who)
Verein für Socialpolitik
(where)
Frankfurt a. M.
(when)
2010

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Konferenzbeitrag

Associated

  • Kreickemeier, Udo
  • Egger, Hartmut
  • Verein für Socialpolitik

Time of origin

  • 2010

Other Objects (12)