In the presence of increasing specialization of workers it becomes
more and more difficult for firms to find the most suitable workers.
In such an environment a multinational corporation has an advantage
because it can exchange workers between plants in different
countries. In this way it can draw on a larger labor market pool,
reducing the mismatch of its workforce. This paper analyzes the
consequences of this advantage for production, employment and, most
We are able to disentangle the effects of worker heterogeneity and
firm heterogeneity on wages and show that the latter is important to
explain why multinationals typically pay higher wages.