By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.
The multinational wage premium is well documented across countries. Using a new German dataset, we identify two previously
overlooked determinants. First, wages paid by foreign multinationals in German plants increase with the distance between headquarters and the plant location. Second, foreign multinationals
headquartered near their German plants pay lower wages than domestic multinationals, implying a negative border effect. We develop a model with plant-specific wages and firms choosing between
exporting and foreign production. Distance reduces the attractiveness of exporting, making firms more willing to accept higher wages
in more distant foreign locations.
