Does The Skill Intensity Of The Multinational Enterprises Matter For Labor Market Outcomes?

Abstract

This paper studies the labor market implications of high-tech versus low-tech foreign firms by using a heterogeneous matching model. This approach allows us to identify the effect of the different skill intensity of the foreign firm's production on the wages of unskilled and skilled workers in the local firm. The analytical and the numerical solutions of the model reveal that both skill and firm premia depend on the cost of vacancy creation, the skill distribution in the local economy, and the technological gap between foreign and the local firms. Results of the paper suggest that increased foreign firm presence due to the reduction in the cost of foreign job creation leads to lower skill premium in high-tech foreign firm case but a higher skill premium in the low-tech foreign firm case. Further results point out that the firm premium increases as the vacancies posted by foreign firm increases, regardless of the skill intensity