Multinational companies, backward linkages, and labour demand elasticities

Abstract

I argue that in contrast to the literature to date efficiency wage and bargaining solutions will typically be independent. If the bargained wage satisfies the efficiency wage constraint efficiency wages are irrelevant. If it does not, typically we have the efficiency wage solution and bargaining is irrelevant.

Multinationals, skills, and wage elasticities

“…domestic firms as well as between multinational and non-multinational firms. The former distinction is comparable with the one in Barba Navaretti et al (2003) and Görg et al (2009). Owner is a dummy variable equal to one if a firm is foreignowned, and zero otherwise, or when we compare multinationals to non-multinationals, it is equal to one if the firm is a multinational.…”

“…Hence, the studies by Barba Navaretti et al (2003) and Görg et al (2009) give different results. A difference in the skill composition between MNEs and nonMNEs, or a difference between Ireland and other European countries, might constitute two explanations.…”

“…We distinguish between foreign and 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 6 Our specification excludes the cost of capital since it is difficult to measure at the firm level. We follow previous studies and assume it to be equal for all firms in the economy and, hence, captured by time dummies in our main specifications (Görg et al 2009;Barba Navaretti et al 2003). We test the robustness of the results by including a firm-level measure of the capital stock.…”

“…Another possible explanation could be that the studies compare elasticities in foreign and domestic firms rather than in MNEs and nonMNEs. It might also be the case that domestic-owned MNEs are of less importance in Ireland (the study by Görg et al 2009) than in most other European countries (the study by Barba Navaretti et al 2003).…”

“…Barba Navaretti et al (2003) suggest that different skill compositions of the workforce in domestic-and foreign-owned firms, in combination with differences in wage elasticities for different skill groups, could explain the results. Görg et al (2009) get a different result using survey data for domestic-and foreign-owned plants in Ireland over the period 1983-1998 in their study on wage elasticities and the role of backward linkages to the domestic economy. They report somewhat higher wage elasticities in foreign-owned firms than in domestic firms.…”