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Multinational production and the skill premium

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  • Shen, Yang
  • Yoo, Myunghwan

Abstract

We develop a quantitative general equilibrium model to examine the impact of multinational production on the within-country wage gap between skilled and unskilled workers. The model predictions are consistent with salient features of multinational firms in the data. Counterfactuals of a two-country analysis show that, when enabling multinational production, aggregate welfare increases in both countries while the wage gap widens in the developed country and shrinks in the less-developed country.

Suggested Citation

  • Shen, Yang & Yoo, Myunghwan, 2022. "Multinational production and the skill premium," Economics Letters, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003251
    DOI: 10.1016/j.econlet.2022.110851
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    References listed on IDEAS

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    More about this item

    Keywords

    Multinational production; Skill premium; Vertical FDI; Wage inequality;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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