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Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers

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  • Martins, Pedro S.

    ()
    (Queen Mary, University of London)

  • Esteves, Luiz A.

    ()
    (Universidade Federal do Paraná)

Abstract

How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3542.

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Length: 43 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3542

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Keywords: ownership changes; foreign direct investment; worker mobility;

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  1. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Universite de Montreal, Departement de sciences economiques.
  2. 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.
  3. Burgess, Simon & Lane, Julia & Stevens, David, 2000. "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 473-502, July.
  4. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  5. 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.
  6. Lipsey, Robert E. & Sjoholm, Fredrik, 2004. "Foreign direct investment, education and wages in Indonesian manufacturing," Journal of Development Economics, Elsevier, vol. 73(1), pages 415-422, February.
  7. Pedro S. Martins & Luiz Alberto Esteves, 2006. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence From Brazil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 158, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Martins, Pedro S., 2004. "Do Foreign Firms Really Pay Higher Wages? Evidence from Different Estimators," IZA Discussion Papers 1388, Institute for the Study of Labor (IZA).
  9. Martins, Pedro S., 2008. "Dispersion in wage premiums and firm performance," Economics Letters, Elsevier, vol. 101(1), pages 63-65, October.
  10. Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 85-102, March.
  11. 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.
  12. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  13. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
  14. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
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Cited by:
  1. 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.
  2. John P. Weche Geluebcke, 2012. "Foreign and Domestic Takeovers in Germany: First Comparative Evidence on the Post-acquisition Target Performance using new Data," Working Paper Series in Economics 249, University of Lüneburg, Institute of Economics.
  3. John S. Earle & Almos Telegdy & Gabor Antal, 2012. "FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008," Budapest Working Papers on the Labour Market 1209, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Earle, John S. & Telegdy, Álmos & Antal, Gábor, 2012. "FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008," IZA Discussion Papers 7095, Institute for the Study of Labor (IZA).

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