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Review of World Economics

Multinationals, Skills, and Wage Elasticities

Journal Article
Nilsson Hakkala, Katariina, Fredrik Heyman and Fredrik Sjöholm (2010). “Multinationals, Skills, and Wage Elasticities”. Review of World Economics 146(2), 263–280.

Katariina Nilsson Hakkala, Fredrik Heyman, Fredrik Sjöholm

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.