Multinational Firms and Labor Market Pooling
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 enterprize (MNE) has an
advantage because it can exchange workers between plants in
different countries. Recruiting from the home and foreign plant
leads to a larger labor market pool for an MNE, reducing the
mismatch of its workforce. This paper analyzes the consequences of
this advantage for production, employment, prices and wages.
In line with recent empirical results, we find that the additional ability to recruit workers from the home
and foreign labor market leads to lower mismatch, higher average
productivity of workers, lower prices, higher output, and higher
employment of a plant of an MNE as compared to a national firm,
while the wage-effects depend on firm productivity.