Across-Country Wage Compression in Multinationals
Jonas Hjort, Xuan Li, Heather Sarsons
American Economic Review · 2026 · Volume 116 · Issue 1
Abstract
Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals' establishments across the world and linked employee-level data on their establishments in Brazil. Headquarters wage changes arising from minimum wage and exchange rate shocks are partially transmitted to workers employed in the same position abroad. Wage change transmission appears to be direct and results from firm-wide wage-setting procedures rather than associated technology or employment changes. "Anchored" wage setting is somewhat associated with particular characteristics of the job × employer × headquarters-establishment country-pair.
Keywords
Multinational Firms, International Business, Foreign Exchange, Human Capital, Skills, Occupational Choice, Labor Productivity, Wage Level and Structure, Wage Differentials, Wages, Compensation, and Labor Costs: Public Policy, International Business Administration, Economic Development: Human Resources, Human Development, Income Distribution, Migration
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