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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1454:
Multinational Firms and Heterogeneous Workers

Mario Larch and Wolfgang Lechthaler

Abstract: 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

Keywords: Heterogeneous labor; Multinational, firms; Intra-wage distribution; Heterogeneous firms; (follow links to similar papers)

JEL-Codes: F23,; F12,; J41; (follow links to similar papers)

37 pages, October 2008

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