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Global managers, local workers: wage setting inside a multinational firm

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  • Minni, Virginia Magda Luisa

Abstract

How are wages set within a multinational firm? Combining cross-country data on wages and labor regulations with personnel records of a large multinational firm, I find that wage setting depends on the rank of the employee in the firm hierarchy. For managers, wages are set by the headquarters regardless of local labor market conditions. For factory workers, wages are adjusted according to country-specific wages and labor regulations. These results suggest that the multinational's internal labor market shields managers against changes in external market conditions, while the firm adapts to local labor markets for factory workers.

Suggested Citation

  • Minni, Virginia Magda Luisa, 2024. "Global managers, local workers: wage setting inside a multinational firm," LSE Research Online Documents on Economics 126836, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:126836
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    Keywords

    multinationals; firm wage-setting; inequality;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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