Hybrid seminar: How do multinational firms affect domestic firms and workers?

This paper examines the impact of multinational enterprises (MNEs) on wages and employment in domestic firms, using comprehensive administrative data from the Netherlands. To address the endogeneity of firm location choice, I develop a shift-share instrumental variable based on the local labour market composition by sector. I find that an increase in the employment share of MNEs in a region leads to higher wages for workers in domestic firms, while firm size and profits decline. I explore how MNE’s access to the foreign labour market influences local wage dynamics. Using the proportion of migrants hired by MNEs as a proxy for their access to the foreign labour market, the results reveal a stronger impact in regions where MNEs rely more on local labour and conversely import less immigrant labour. This suggests that the observed wage increase is partly driven by heightened demand for local labour.