Foreign Firms, Domestic Wages

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt


Three types of theories have been used to explain the wage premium in foreign firms: the theories of heterogeneous workers, heterogeneous learning, and heterogeneous firms. We set up a model that explicitly encompasses two of these theories, and that can illustrate the third. This unifying framework allows us to rigorously compare the predictions of the different theories. Thus, it is a useful tool for interpreting new and existing empirical evidence. We illustrate the usefulness of the model on matched employer−employee data, and we find considerable support for all three theories. In particular, the theory of heterogeneous workers can explain up to 75 percent of the premium.
TidsskriftScandinavian Journal of Economics
Udgave nummer2
Sider (fra-til)292-325
StatusUdgivet - apr. 2013

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JEL Classification: F2;F16;F23

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