A number of studies have appeared in the literature which consider the impact on the wage distribution of, for example: gender and ethnic differences; of union membership (or coverage by collective agreements); of firm size; of belonging to the private vis-a-vis public sector; of being self-employed as opposed to an employee). Another potentially important determinant of wages is whether the firm employing an individual is locally owned or whether it is part of a multiregional (or multinational) organization which operates branches in various locations. This paper sets out to investigate the size of this locational wage differential across all sectors for a region of the UK using a bivariate sample selectivity model where the choice of firm type (i.e. locally owned or externally owned) and union coverage are endogenous. The results confirm that full-time male manual workers are not randomly sorted across sectors (e.g. employees in larger firms tend to be in the externally owned sector and to be covered by union wage agreements) and workers tend to locate in those sectors where they have a comparative advantage in earnings. It was also found that externally owned firms tend to be risk adverse to union involvement in the wage-setting process. Lastly, most of the wage differential was found to be associated with differing wage structures across the two sectors, rather than differing characteristics of workers employed in each sector.
