The Contribution of Multinational Enterprises to Labor Productivity

We examine the impact of multinational enterprises (MNEs) on labor productivity in two ways: 1) creating high-paying jobs; and 2) improving employees’ human capital. Our analysis is based on a unique database that matches workers to companies, for the 450 largest companies in Israel, during the years 2005-2010. The main challenge in dentifying the impact of MNEs on labor productivity stems from their tendency to cherry-pick workers. This study offers an innovative solution to this selection bias by constructing a sample of employees who have all worked at MNEs at some point. We find that, on average, current employment at a MNE is associated with a wage premium of 8.3%. Moreover, past work experience at a MNE has a positive 1.6% impact on wages. Although economically significant, the results are relatively modest compared to those reported in the literature. In addition, we differentiate MNEs according to size and brand recognition, and find that the impact on wages is larger for leading MNEs. These results were found to be stable with respect to changes in the sample and in specifications.