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Importing Automation and Wage Inequality through Foreign Acquisitions

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Abstract

Is technology or trade driving increases in wage inequality? We propose that technology interacts with trade in the form of foreign direct investments to widen domestic wage inequality. We show that foreign acquisitions of domestic firms disproportionately affect wages for workers who perform tasks sensitive to the technology specialization (software or robotics) of the acquiring firm. Based on Swedish matched employer-employee data covering two decades and staggered difference-in-differences methods we find wages to decline by up to 5.2% annually over an eight-year post period. Our results suggest that a trade policy aimed at attracting foreign companies with high technological capabilities can help countries advance technologically, but this may come at the cost of increased domestic wage inequality.

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  • Gardberg, Malin & Heyman, Fredrik & Tåg, Joacim, 2023. "Importing Automation and Wage Inequality through Foreign Acquisitions," Working Paper Series 1457, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1457
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    More about this item

    Keywords

    Acquisitions; AI; Automation; Inequality; Robots; Technology; Trade; Mergers and Acquisitions; Multinational firms; Wages;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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