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Foreign Taleovers and Wages: Theory and Evidence from Hungary

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  • Sándor Csengodi

    (Corvinus University of Budapest)

  • Rolf Jungnickel

    (HWWA)

  • Dieter Urban

    (Johannes Gutenberg - University Mainz)

Abstract

This study discriminates FDI technology spillover from learning effects. Whenever learning takes time, our model predicts that foreign investors deduct the economic value of learning from wages of inexperienced workers and add it to experienced ones to prevent them from moving to local competitors. Hence, the national wage bill is unaffected by foreign takeovers. In contrast to learning, technology spillover effects occur whenever a worker with MNE experience contributes more to local firms’ than to MNEs’ productivity. In this case, experienced MNE workers are hired by local firms and the host country obtains a welfare gain. We investigate empirically wages, productivity, and worker turnover during the course of foreign takeovers on employee-employer matched data of Hungary and find evidence consistent with learning, but not with FDI technology spillovers.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 208.

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Date of creation: 15 Jun 2005
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Handle: RePEc:csl:devewp:208

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Keywords: FDI; foreign takeover; cross-border M&A; wage regression; employee-employer matched data; propensity score matching; FDI technology spillover;

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Cited by:
  1. Dieter M. Urban, 2010. "FDI, Technology Spillovers, and Wages," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 443-453, 08.
  2. Modén, Karl-Markus & Norbäck, Pehr-Johan & Persson, Lars, 2007. "Efficiency and Ownership Structure – The Case of Poland," Working Paper Series, Research Institute of Industrial Economics 703, Research Institute of Industrial Economics.
  3. Sándor Csengödi & Rolf Jungnickel & Dieter M. Urban, 2008. "Foreign Takeovers and Wages in Hungary," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 144(1), pages 55-82, April.

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