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Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training

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Author Info

  • Görg, Holger

    ()
    (Kiel Institute for the World Economy)

  • Strobl, Eric

    ()
    (Ecole Polytechnique, Paris)

  • Walsh, Frank

    ()
    (University College Dublin)

Abstract

Foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers in both developed and developing countries alike. Although a number of studies have documented and some attempted to explain this stylized fact, the issue still remains unresolved. In a multi-period bargaining framework we show that if firm specific training is more productive in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employeremployee matched data set we show that the foreign wage premium is only acquired by workers over time spent in the firm and only by those that receive on the job training, thus providing empirical support for a firm specific human capital acquisition explanation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 590.

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Length: 34 pages
Date of creation: Oct 2002
Date of revision:
Publication status: published in: Review of World Economics, 2007, 143(3), 464-482
Handle: RePEc:iza:izadps:dp590

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Keywords: on-the-job training; foreign firms; wages;

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  1. Rachel Griffith & Helen Simpson, 2004. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 147-180 National Bureau of Economic Research, Inc.
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