Abstract
We develop a quantitative general equilibrium model to examine the impact of multinational production on the within-country wage gap between skilled and unskilled workers. The model predictions are consistent with salient features of multinational firms in the data. Counterfactuals of a two-country analysis show that, when enabling multinational production, aggregate welfare increases in both countries while the wage gap widens in the developed country and shrinks in the less-developed country. • We examine the effect of multinational production on the skill premium. • Our model predictions are consistent with empirical facts of multinational firms. • A two-country-world simulation shows overall gains from multinational production. • The skill premium rises in the skill-abundant country and falls in the other.
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