Description:

Speaker: Aaron Wolf

Title: Global Employers, Local Effects: How Multinationals Change Domestic Training Investment

Abstract: Foreign multinational entry and expansion often reshape domestic labor markets by changing the competitive landscape for local firms. While existing work documents wage premia and spillovers, it provides limited evidence on how foreign competitors affect domestic firms’ training decisions, especially how it changes the composition of training across general (portable) and firm-specific (non-portable) programs. We fill this gap by connecting foreign-driven changes in outside options directly to domestic firms' wage and training incentives. We develop a tractable on-the-job search model in which foreign expansion improves outside offers, inducing domestic firms to raise retention wages that crowd out training under limited liquidity. This framework generates predictions for wages, worker flows, and human capital investment, which we test using rich South African administrative data. The results show that higher exposure to foreign multinationals raises domestic wage bills and reduces turnover, yet leads to a contraction in training. We observe economically meaningful declines in total training, driven primarily by firm-specific programs on both the extensive and intensive margins. These findings provide new evidence that globalization shapes domestic human capital accumulation through talent competition, and offers a mechanism that explains why investment can fall even as firms successfully retain their workers.