Multinational Firms and Heterogeneous Workers

In the presence of increasing specialization of workers it becomes

more and more difficult for firms to find the most suitable workers.

In such an environment a multinational corporation has an advantage

because it can exchange workers between plants in different

countries. In this way it can draw on a larger labor market pool,

reducing the mismatch of its workforce. This paper analyzes the

consequences of this advantage for production, employment and, most

prominently, wages.

We are able to disentangle the effects of worker heterogeneity and

firm heterogeneity on wages and show that the latter is important to

explain why multinationals typically pay higher wages.