Working Paper: CEPR ID: DP14465
Authors: Jonas Hjort; Xuan Li; Heather Sarsons
Abstract: Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,213 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 from firm-wide wage-setting procedures rather than associated technology or employment changes. "Anchored: wage-setting is associated with particular headquarter country characteristics.
Keywords: wage compression; multinationals; minimum wage; exchange rate shocks
JEL Codes: F23; J01; J3; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| headquarters wage changes (J31) | foreign establishment wages (J31) |
| 10% increase in headquarters wages (J39) | 0.2% increase in wages for low-skill jobs at foreign establishments (F66) |
| 1% appreciation of home country's currency (F31) | 0.5% increase in wages at foreign establishments (J39) |
| headquarters wage changes (J31) | wage anchoring at foreign establishments (J31) |
| firm-wide wage-setting practices (J33) | wage compression across countries (J31) |