Multinationals, skills, and wage elasticities

Katariina Nilsson Hakkala (1) , Fredrik Heyman (2) , Fredrik Sjöholm (3)

1 Government Institute for Economic Research and Helsinki School of Economics
2 The Research Institute of Industrial Economics
3 The Research Institute of Industrial Economics and Örebro University

The increase in foreign direct investments raises concerns about labor market consequences in many countries. It is feared that multinational firms are inclined to shift jobs abroad and increase job volatility. We use firm-level data to examine if multinationality and foreign ownership affect the wage elasticity of labor demand. Unlike previous studies, we distinguish the effect on different skill groups of employees. We find no general difference in wage elasticity between foreign and domestic firms but the wage elasticity is higher in multinational firms than in national firms, in particular for medium-skilled workers.

Mots clés: FDI; Cross-border acquisitions; Multinational enterprises; Foreign ownership; Labor demand; Skill groups; J23; F16; F21; F23

Katariina Nilsson Hakkala, Fredrik Heyman, Fredrik Sjöholm. Multinationals, skills, and wage elasticities. Review of World Economics, 2010, 146 (2), pp.263-280. ⟨10.1007/s10290-009-0047-9⟩. ⟨hal-00563487⟩