Multinational Spillovers through Worker Turnover∗

Labor turnover is a commonly-cited mechanism for the transmission of spillovers from multinational to domestic firms, but until now there has been little direct evidence for this mechanism. Using a novel matched establishment-worker database from Brazil, I present evidence consistent with the existence of positive multinational spillovers through worker mobility in Brazil. The paper explores where spillovers occur and how they are absorbed. The main results suggest that the magnitude of wage spillovers from multinational establishments depends on the sector and the worker under consideration. The results provide support for the hypothesis that higher-skilled former multinational-establishment workers are better able to convey information and higher-skilled incumbent domestic-establishment workers are better able to absorb information. Information is best transferred between similarly skilled groups of highskilled workers and from higher-skilled former multinational-establishment workers to lower-skilled incumbent domestic-establishment workers. The results are robust to various model specifications, including worker and establishment fixed effects. ∗I am grateful to Marc Muendler and Jim Rauch for their guidance and support throughout this research, and to Eli Berman, Julie Cullen, Gordon Hanson, Craig McIntosh, and Giovanni Peri for helpful discussions. I also thank seminar participants at the UCSD Department of Economics, Applied Lunch Seminar, the UCSD joint Department of Economics—Graduate Institute of International Relations and Pacific Studies, International and Development Seminar, and the Santa Cruz Center for International Economics (SCCIE) 10th Annual Conference. Special thanks to Paulo Furtado de Castro for help with the RAIS data, and to Patricia Vanderlei Fernandes and Paulo Marcelo Cavalcanti Muniz of the Brazilian Central Bank for providing the RDE-IED data. Financial support from the Institute for International, Comparative, and Area Studies, the Dean of Social Sciences, and the Center for Iberian and Latin American Studies at the University of California, San Diego is acknowledged. †Department of Economics, University of California, Santa Cruz, 437 Engineering 2, Santa Cruz, CA 95064, [email protected], (831) 459-5397.