Across-Country Wage Compression in Multinationals

Jonas Hjort, Xuan Li and Heather Sarsons

American Economic Review, 2026, vol. 116, issue 1, 52-87

Abstract: Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals' establishments across the world and linked employee-level data on their establishments in Brazil. Headquarters wage changes arising from minimum wage and exchange rate shocks are partially transmitted to workers employed in the same position abroad. Wage change transmission appears to be direct and results from firm-wide wage-setting procedures rather than associated technology or employment changes. "Anchored" wage setting is somewhat associated with particular characteristics of the job × employer × headquarters-establishment country-pair.

JEL-codes: F23 F31 J24 J31 J38 M16 O15 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/aer.20200042

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