Doing business far from home: Multinational firms and labor market outcomes in Saudi Arabia

We study the labor market outcomes at foreign firms in a host country with deep-seated cultural norms that differ substantially from their home country norms. Using employer–employee matched data of the private sector in Saudi Arabia, we find that foreign firms hire a smaller share of women but offer them disproportionately higher wages than domestic firms, suggesting that wage differentials alone do not fully explain worker share differences. To account for these findings, we develop a model incorporating both productivity and amenities to quantify their roles in determining labor market outcomes. Through the lens of our model, women experience disproportionately lower amenities at foreign firms relative to men, such that women sorting away from foreign firms is primarily driven by amenities rather than productivity. Finally, among foreign firms, workers at foreign firms from culturally similar countries to the host country experience greater amenities but lower wage premiums. Our results demonstrate amenities are quantitatively important in understanding the labor market outcomes of foreign firms in a setting where home and host country cultural norms depart.