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Foreign Takeovers and Wage Dispersion in Hungary

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  • Sándor Csengödi
  • Dieter M. Urban

Abstract

This study tests FDI technology spillover models with the assumption that learning takes time against wage bargaining models by estimating the wage-premium of a foreign takeover. The technology spillover theory predicts a larger wage growth in firms taken over by foreign investors than in local firms. However, this wage growth should be confined to high-skilled workers or workers with a high level of education. Wage bargaining models also predict such a wage growth. But it should be confined to workers who are organized in trade unions, i.e. workers with low or medium level of education or skill. We apply Hungarian employee-employer matched data from 1992 until 2001, and reject the FDI technology spillover model in favor of the wage bargaining model when differentiating the wage premium by education or occupation, both by applying Mincer wage regressions and the nearest-neighbor matching method.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2188.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2188

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Related research

Keywords: FDI; foreign takeover; cross-border M&A; Mincer wage regression; employee-employer matched data; nearest-neighbor matching;

References

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  1. Dieter M. Urban, 2007. "FDI Technology Spillovers and Wages," CESifo Working Paper Series 2132, CESifo Group Munich.
  2. Nikolaj Malchow-Møller & James R. Markusen & Bertel Schjerning, 2007. "Foreign Firms, Domestic Wages," NBER Working Papers 13001, National Bureau of Economic Research, Inc.
  3. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
  4. Heyman, Fredrik & Gustavsson Tingvall, Patrik & Sjöholm, Fredrik, 2006. "Is There Really a Foreign Ownership Wage Premium? Evidence from Matched Employer-Employee Data," Working Paper Series 674, Research Institute of Industrial Economics.
  5. J. David Brown & John S. Earle & Almos Telegdy, 2005. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles 05-125, W.E. Upjohn Institute for Employment Research.
  6. Glass, Amy Jocelyn & Saggi, Kamal, 2002. " Multinational Firms and Technology Transfer," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 495-513, December.
  7. J. David Brown & John S. Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles 05-121, W.E. Upjohn Institute for Employment Research.
  8. Budd, John W & Konings, Jozef & Slaughter, Matthew, 2002. "International Rent Sharing in Multinational Firms," CEPR Discussion Papers 3326, C.E.P.R. Discussion Papers.
  9. Rita Almeida, 2004. "The labor market effects of foreign-owned firms," Policy Research Working Paper Series 3300, The World Bank.
  10. Gabor Kertesi & Janos Kollo, 2001. "Economic transformation and the revaluation of human capital - Hungary, 1986-1999," Budapest Working Papers on the Labour Market 0104, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  11. Sándor Csengödi & Rolf Jungnickel & Dieter M. Urban, 2008. "Foreign Takeovers and Wages in Hungary," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 55-82, April.
  12. Holger Görg & Eric Strobl & Frank Walsh, 2007. "Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(3), pages 464-482, October.
  13. Andrews, Martyn J. & Bellmann, Lutz & Schank, Thorsten & Upward, Richard, 2007. "The Takeover and Selection Effects of Foreign Ownership in Germany : An Analysis Using Linked Worker-Firm Data," Discussion Papers 50, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  14. Heyman, Fredrik & Sjöholm, Fredrik & Gustavsson Tingvall, Patrik, 2006. "Acquisitions, Multinationals, and Wage Dispersion," EIJS Working Paper Series 222, The European Institute of Japanese Studies.
  15. Ashoka Mody & Assaf Razin & Efraim Sadka, 2003. "The Role of Information in Driving FDI Flows: Host-Country Tranparency and Source Country Specialization," NBER Working Papers 9662, National Bureau of Economic Research, Inc.
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