Multinational Production, Skilled Labor and Real Wages

James Markusen and Anthony Venables

No 5483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Adapting our earlier model of multinationals, we address policy issues involving wages and labor skills. Multinational firms may arise endogenously, exporting their firm-specific knowledge capital to foreign production facilities, and geographically fragmenting production into skilled and unskilled-labor-intensive activities. Multinationals thus alter the nature of trade, from trade in goods (produced with both skilled and unskilled labor) to trade in skilled- labor-intensive producer services. Results shed light on several policy questions. First, multinationals increase the skilled/unskilled wage gap in the high income country and, under some circumstances, in the low income country as well. Second, there is a sense in which multinationals export low skilled jobs to the lower income country. Third, trade barriers do not protect unskilled labor in the high income countries. By inducing a regime shift to multinationals, trade barriers protect the abundant factor, at least in the high income country and possibly in both countries. Fourth, a convergence in country characteristics induces the entry of multinationals and raises the skilled-unskilled wage gap in the initially large and skilled-labor-abundant country, and possibly in the small skilled-labor-scarce country as well.

JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 1996-03
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published as in Richard Baldwin (ed), Dynamic Issues in Applied Commercial Policy Analysis, Cambridge: Cambridge University Press, 1999.

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