Inward Foreign Direct Investment, Superstar Firms and Wage Inequality between Firms: Evidence from European Regions [with Iulia Siedschlag]

This paper examines the causal effect of multinational enterprises (MNEs) on between-firm wage inequality across European regions, utilizing firm-level data from the Orbis Europe dataset (2012–2021). Employing measures such as Gini coefficients and wage percentile ratios and addressing endogeneity through regional FDI shocks, the findings demonstrate that the regional presence of MNEs significantly contributed to increased wage inequality between firms across European regions. The effects are more pronounced for MNE parent firms and top-performing affiliates, underscoring the role of international superstar firms in driving regional disparities. This research advances the understanding of FDI’s distributional impacts and its implications for regional inequalities.