Why Foreign Ownership May be Good for You

Hartmut Egger () and Udo Kreickemeier

No 3631, CESifo Working Paper Series from CESifo

Abstract: We develop a general equilibrium two-country model with heterogeneous producers and rent sharing at the firm level due to fairness preferences of workers. We identify two sources of a multinational wage premium. On the one hand, there is a pure composition effect because multinational firms are more productive, make higher profits, and therefore pay higher wages. On the other hand, there is a firm-level wage effect: A multinational firm pays higher wages in its home market than an otherwise identical national firm since it has higher global profits. We analyse how these two sources interact in determining the multinational wage premium in a setting with two identical countries, and show that in this case the wage premium is fully explained by firm characteristics. We then allow for technology differences between countries and find that a residual wage premium exists in the technologically backward country, but not in the advanced country.

Keywords: multinational firms; wage premium; heterogeneous firms (search for similar items in EconPapers)
JEL-codes: D31 F12 F15 F16 H25 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Chapter: Why Foreign Ownership May be Good for You (2017)
Journal Article: WHY FOREIGN OWNERSHIP MAY BE GOOD FOR YOU (2013)
Working Paper: Why foreign ownership may be good for you (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3631

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