The Effects of Foreign Multinationals on Workers and Firms in the United States

67 Pages Posted: 20 Aug 2019 Last revised: 23 Aug 2019

See all articles by Bradley Setzler

Bradley Setzler

University of Chicago - Department of Economics

Felix Tintelnot

University of Chicago Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2019

Abstract

Governments go to great lengths to attract foreign multinationals because they are thought to raise the wages paid to their employees (direct effects) and to improve outcomes at local domestic firms (indirect effects). We construct the first U.S. employer-employee dataset with foreign ownership information from tax records to measure these direct and indirect effects. We find the average direct effect of a foreign multinational firm on its U.S. workers is a 7 percent increase in wages. This premium is larger for higher skilled workers and for the employees of firms from high GDP per capita countries. We find evidence that it is membership in a multinational production network—instead of foreignness—that generates the foreign firm premium. We leverage the past spatial clustering of foreign-owned firms by country of ownership to identify the indirect effects. An expansion in the foreign multinational share of commuting zone employment substantially increases the employment, value added, and—for higher earning workers—wages at local domestic-owned firms. Per job created by a foreign multinational, our estimates suggest annual gains of 16,000 USD to the aggregate wages of local incumbents, of which about two-thirds is due to indirect effects. Our estimates suggest that—via mega-deals for subsidies from local governments—foreign multinationals are able to extract a sizable fraction of the local surplus they generate.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Setzler, Bradley and Tintelnot, Felix, The Effects of Foreign Multinationals on Workers and Firms in the United States (August 2019). NBER Working Paper No. w26149. Available at SSRN: https://ssrn.com/abstract=3439153

Bradley Setzler (Contact Author)

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Felix Tintelnot

University of Chicago Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
132
PlumX Metrics