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  5. Across-Country Wage Compression in Multinationals

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Across-Country Wage Compression in Multinationals

  • Jonas Hjort
  • Xuan Li
  • Heather Sarsons
American Economic Review (Forthcoming)

Abstract

Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals’ establishments across the world and linked employee-level data on their establishments in Brazil. Headquarters wage changes arising from minimum wage and exchange rate shocks are partially transmitted to workers employed in the same position abroad. Wage change transmission appears to be direct and results fromfirm-wide wage-setting procedures rather than associated technology or employment changes. “Anchored” wage-setting is somewhat associated with particular characteristics of the job×employer×headquarter-establishment country-pair.

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