Across-Country Wage Compression in Multinationals
Xuan Li and
No 14465, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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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