Across-Country Wage Compression in Multinationals

75 Pages Posted: 5 Mar 2020

See all articles by Jonas Hjort

Jonas Hjort

Columbia Business School - Finance and Economics

Xuan Li

Hong Kong University of Science & Technology (HKUST)

Heather Sarsons

University of Chicago - Booth School of Business

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Date Written: February 29, 2020

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.

JEL Classification: F23, J01, J3, J31

Suggested Citation

Hjort, Jonas and Li, Xuan and Sarsons, Heather, Across-Country Wage Compression in Multinationals (February 29, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-15, Available at SSRN: https://ssrn.com/abstract=3548038 or http://dx.doi.org/10.2139/ssrn.3548038

Jonas Hjort

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Xuan Li

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Heather Sarsons (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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