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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 Nottingham)

  • Görg, Holger

    ()
    (Kiel Institute for the World Economy)

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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Bibliographic 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: matching estimator; multinationals; acquisitions; wages;

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References

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  1. 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).
  2. Nickell, Stephen & Wadhwani, Sushil B, 1989. "Insider Forces and Wage Determination," CEPR Discussion Papers 310, C.E.P.R. Discussion Papers.
  3. 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, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  4. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  5. Robert E. Lipsey & Fredrik Sjoholm, 2001. "Foreign Direct Investment and Wages in Indonesian Manufacturing," NBER Working Papers 8299, National Bureau of Economic Research, Inc.
  6. 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.
  7. Fredrik Sjöholm & Robert E. Lipsey, 2006. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 201-221.
  8. 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.
  9. 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.
  10. 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.
  11. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
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Cited by:
  1. Heyman, Fredrik & Gustavsson Tingvall, Patrik & Sjöholm, Fredrik, 2006. "Acquisitions, Multinationals and Wage Dispersion," Working Paper Series 675, Research Institute of Industrial Economics.
  2. Bandick, Roger, 2004. "Do Workers Benefit from Foreign Ownership? Evidence from Swedish Manufacturing," Working Papers 2004:15, Örebro University, School of Business.
  3. Almeida, Rita, 2007. "The labor market effects of foreign owned firms," Journal of International Economics, Elsevier, vol. 72(1), pages 75-96, May.
  4. 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).

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