The Effects of Foreign Multinationals on Workers and Firms in the United States / Bradley Setzler, Felix Tintelnot.

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Setzler, Bradley

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26149.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Governments go to great lengths to attract foreign multinationals because they are thought to raise the wages paid to their employees (direct effects) and to improve outcomes at local domestic firms (indirect effects). We construct the first U.S. employer-employee dataset with foreign ownership information from tax records to measure these direct and indirect effects. We find the average direct effect of a foreign multinational firm on its U.S. workers is a 7 percent increase in wages. This premium is larger for higher skilled workers and for the employees of firms from high GDP per capita countries. We find evidence that it is membership in a multinational production network--instead of foreignness--that generates the foreign firm premium. We leverage the past spatial clustering of foreign-owned firms by country of owner-ship to identify the indirect effects. An expansion in the foreign multinational share of commuting zone employment substantially increases the employment, value added, and--for higher earning workers--wages at local domestic-owned firms. Per job created by a foreign multinational, our estimates suggest annual gains of 13,400 USD to the aggregate wages of local incumbents, two-thirds of which are from indirect effects. Our estimates suggest that--via mega-deals for subsidies from local governments--foreign multinationals are able to extract a sizable fraction of the local surplus they generate.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w26149 (Browse shelf(Opens below))	Not For Loan

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August 2019.

Governments go to great lengths to attract foreign multinationals because they are thought to raise the wages paid to their employees (direct effects) and to improve outcomes at local domestic firms (indirect effects). We construct the first U.S. employer-employee dataset with foreign ownership information from tax records to measure these direct and indirect effects. We find the average direct effect of a foreign multinational firm on its U.S. workers is a 7 percent increase in wages. This premium is larger for higher skilled workers and for the employees of firms from high GDP per capita countries. We find evidence that it is membership in a multinational production network--instead of foreignness--that generates the foreign firm premium. We leverage the past spatial clustering of foreign-owned firms by country of owner-ship to identify the indirect effects. An expansion in the foreign multinational share of commuting zone employment substantially increases the employment, value added, and--for higher earning workers--wages at local domestic-owned firms. Per job created by a foreign multinational, our estimates suggest annual gains of 13,400 USD to the aggregate wages of local incumbents, two-thirds of which are from indirect effects. Our estimates suggest that--via mega-deals for subsidies from local governments--foreign multinationals are able to extract a sizable fraction of the local surplus they generate.