Advanced Search
MyIDEAS: Login

FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008

Contents:

Author Info

  • John S. Earle

    ()
    (George Mason University - School of Public Policy and Central European University)

  • Almos Telegdy

    ()
    (The Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences)

  • Gabor Antal

    ()
    (The Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences)

Registered author(s):

    Abstract

    We estimate the effects of foreign direct investment (FDI) acquisitions on firm-average and worker-specific wages using universal firm-level panel data and linked employer-employee data for Hungary. Our identification strategy exploits a 23 year-long panel with 4,926 foreign acquisitions to match on pre-acquisition data and to control for fixed effects for firms, detailed worker groups, and worker-firm matches. The estimates after these adjustments imply positive effects of about 12-27 percent on average wages. In an extension to 983 foreign acquisitions subsequently divested to domestic owners, we find that much of the acquisition effect is reversed by divestment. Estimating by worker type, we find positive effects for each of 64 gender-age-education-tenure groups, for all major occupations, and for all deciles of the wage distribution; the magnitudes are fairly uniform except for some skill-bias defined by education, occupation, and wage quantile. Even incumbents show wage gains, although not as large as post-acquisition hires. The evidence implies little role either for measurement problems (in hours worked, compensation, or misreporting) or for residual selection (associated with firm or worker turnover), but suggests a strong cross-firm association of FDI wage premia with similar differentials in productivity.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.econ.core.hu/file/download/bwp/bwp1209.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series Budapest Working Papers on the Labour Market with number 1209.

    as in new window
    Length: 55 pages
    Date of creation: Nov 2012
    Date of revision:
    Handle: RePEc:has:bworkp:1209

    Contact details of provider:
    Postal: 1112 Budapest, Budaorsi ut 45.
    Phone: (+36-1) 309-2652
    Fax: (36-1) 319-3136
    Web page: http://econ.core.hu
    More information through EDIRC

    Related research

    Keywords: foreign acquisitions; FDI; earnings; wage differentials; productivity; difference-in differences matching; Hungary;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Sourafel Girma & Holger Görg, 2006. "Evaluating the foreign ownership wage premium using a difference-indifferences matching approach," The Institute for International Integration Studies Discussion Paper Series iiisdp165, IIIS.
    2. Matthias Arnold, Jens & Javorcik, Beata S., 2009. "Gifted kids or pushy parents? Foreign direct investment and plant productivity in Indonesia," Journal of International Economics, Elsevier, vol. 79(1), pages 42-53, September.
    3. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1997. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
    4. Martins, Pedro S. & Esteves, Luiz A., 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," IZA Discussion Papers 3542, Institute for the Study of Labor (IZA).
    5. Lichtenberg, Frank R & Siegel, Donald, 1990. "The Effect of Ownership Changes on the Employment and Wages of Central Office and Other Personnel," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 383-408, October.
    6. Pedro S. Martins, 2011. "Paying More To Hire The Best? Foreign Firms, Wages, And Worker Mobility," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 349-363, 04.
    7. Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 15-26, February.
    8. Heyman, Fredrik & Sjöholm, Fredrik & Gustavsson Tingvall, Patrik, 2004. "Is There Really A Foreign Ownership Wage Premium?Evidence From Matched Employer-Employee Data," EIJS Working Paper Series 206, The European Institute of Japanese Studies.
    9. Waldkirch, Andreas & Ofosu, Andra, 2008. "Foreign Presence, Spillovers, and Productivity: Evidence from Ghana," MPRA Paper 8577, University Library of Munich, Germany.
    10. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
    11. Donald S. Siegel & Kenneth L. Simons & Tomas Lindstrom, 2009. "Ownership Change, Productivity, and Human Capital: New Evidence from Matched Employer-Employee Data," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 397-442 National Bureau of Economic Research, Inc.
    12. Groshen, Erica L, 1991. "Sources of Intra-industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 869-84, August.
    13. Rita Almeida, 2004. "The labor market effects of foreign-owned firms," Policy Research Working Paper Series 3300, The World Bank.
    14. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    15. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc.
    16. Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
    17. Heyman, Fredrik & Gustavsson Tingvall, Patrik & Sjöholm, Fredrik, 2006. "Acquisitions, Multinationals and Wage Dispersion," Working Paper Series 675, Research Institute of Industrial Economics.
    18. Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-85, August.
    19. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
    20. Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
    21. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
    22. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
    23. World Bank, 2002. "Transition, The First Ten Years : Analysis and Lessons for Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 14042, October.
    24. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Telegdy, Álmos, 2013. "A közszféra és a vállalatok bérei közötti átterjedési hatás Magyarországon
      [Public-sector pay spillovers in Hungary: Identification from a large sectoral pay increase]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 555-578.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:has:bworkp:1209. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.