Multinational Production and the Skill Premium

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