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Evaluating the Causal Effects of Foreign Acquisition on Domestic Skilled and Unskilled Wages

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Author Info
Girma, Sourafel () (University of Leicester)
Goerg, Holger (University of Nottingham, DIW Berlin and IZA Bonn)

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Abstract

This paper investigates the effects of the takeover of a domestic establishment by foreign owners on the domestic target’s development of wages for skilled and unskilled workers. We pay particular attention to identifying the causal effect, using a propensity score matching approach combined with a difference-in-differences estimator, and differences in post acquisition effects depending on the nationality of the acquirer. Our results suggest that there is substantial heterogeneity in the post-acquisition wage effect depending on the nationality of the foreign acquirer, the industry in which the firms operate and the skill group of workers. In particular, we find that skilled workers, on average, experience a post acquisition increase in the wage rate following an acquisition by a US firm, while no such effect is discernible following acquisitions by EU or firms of other nationalities. For unskilled workers, there are positive post acquisition wage effects from take-overs by EU firms in the electronics industry and US firms in the food industry.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 903.

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Length: 26 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:iza:izadps:dp903

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Related research
Keywords: multinationals; acquisitions; wages; matching estimator;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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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.:
  1. Markusen, James R, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-89, Spring. [Downloadable!] (restricted)
  2. Görg, Holger & Strobl, Eric & Walsh, Frank, 2002. "Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training," IZA Discussion Papers 590, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Carmichael, F, 1992. "Multinational Enterprise and Strikes: Theory and Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(1), pages 52-68, February.
  4. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November. [Downloadable!] (restricted)
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  5. 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. [Downloadable!]
  6. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 605-54, October. [Downloadable!] (restricted)
  7. Nickell, Stephen J & Wadhwani, Sushil, 1990. "Insider Forces and Wage Determination," Economic Journal, Royal Economic Society, vol. 100(401), pages 496-509, June. [Downloadable!] (restricted)
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  8. Lipsey, Robert E. & Sjöholm, Fredrik, 2002. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," EIJS Working Paper Series 166, The European Institute of Japanese Studies. [Downloadable!]
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  9. Robert E. Lipsey & Fredrik Sjoholm, 2001. "Foreign Direct Investment and Wages in Indonesian Manufacturing," NBER Working Papers 8299, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Rachel Griffith & Helen Simpson, 2003. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Working Papers 9573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, 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.)

  1. Pedro S. Martins, 2004. "Do Foreign Firms Really Pay Higher Wages? : Evidence from Different Estimators," CRIEFF Discussion Papers 0409, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
    Other versions:
  2. Heyman, Fredrik & Gustavsson Tingvall, Patrik & Sjöholm, Fredrik, 2006. "Acquisitions, Multinationals and Wage Dispersion," Working Paper Series 675, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  3. Bandick, Roger, 2004. "Do Workers Benefit from Foreign Ownership? Evidence from Swedish manufacturing," Working Paper Series 201, Trade Union Institute for Economic Research. [Downloadable!]
    Other versions:
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