Across-Country Wage Compression in Multinationals

Jonas Hjort, Xuan Li and Heather Sarsons

No 14465, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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

Date: 2020-03
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