The Inter-Industry Wage Structure of U.S. Multinationals

Little is known about wage determination by multinationals, despite the much-discussed role of globalisation upon wage dispersion. Here we examine industry-and host-country-specific 1998 data on compensation of foreign affiliates of U.S. firms and compare that with U.S. labour-market data. We find substantial differences in employment distributions, that the inter-industry wage structure of US affiliates is less dispersed than the same structure in the U.S. and that the two industry wage premia are moderately correlated. We argue that these findings are consistent with the vertical model of FDI but less so with claims that multinationals increase wage inequality.