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The takeover and selection effects of foreign ownership in Germany: an analysis using linked worker-firm data

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  • Martyn Andrews,
  • Lutz Bellmann,
  • Thorsten Schank,
  • Richard Upward

Abstract

We use a linked employer-employee data set from Germany to estimate the wage effect of foreign-affiliates in (the former) East and West Germany . In addition, the wage effects of the large number of West German affiliates which are located in East Germany are also considered. The implemented techniques allow us to control both for worker- and plant-level unobserved components of earnings. We find large selection effects both in terms of worker- and firm unobserved components of wages. The selection effect is larger for East German plants. Once the selection effect is taken into account, the genuine takeover effect is small and in some cases insignificantly different from zero. In contrast to the selection effect, the takeover effect is slightly larger in West Germany , where it amounts to 2.7%.

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/08.

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Handle: RePEc:not:notgep:07/08

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Keywords: Foreign ownership; wages; linked employer-employee data;

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References

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  1. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers, CIRANO 94s-23, CIRANO.
  2. Steven Globerman & John C. Ries & Ilan Vertinsky, 1994. "The Economic Performance of Foreign Affiliates in Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 27(1), pages 143-56, February.
  3. Girma, Sourafel & Greenaway, David & Wakelin, Katharine, 2001. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 48(2), pages 119-33, May.
  4. Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(1), pages 85-102, March.
  5. Pedro S. Martins, 2004. "Do Foreign Firms Really Pay Higher Wages? : Evidence from Different Estimators," CRIEFF Discussion Papers, Centre for Research into Industry, Enterprise, Finance and the Firm 0409, Centre for Research into Industry, Enterprise, Finance and the Firm.
  6. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  7. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers, Columbia - Graduate School of Business 95-21, Columbia - Graduate School of Business.
  9. Holger Görg & Eric Strobl & Frank Walsh, 2007. "Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 143(3), pages 464-482, October.
  10. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
  11. Lee, Myoung-jae & Kang, Changhui, 2006. "Identification for difference in differences with cross-section and panel data," Economics Letters, Elsevier, Elsevier, vol. 92(2), pages 270-276, August.
  12. Martyn Andrews & Thorsten Schank & Richard Upward, 2006. "Practical fixed-effects estimation methods for the three-way error-components model," Stata Journal, StataCorp LP, StataCorp LP, vol. 6(4), pages 461-481, December.
  13. Zadia Feliciano & Robert E. Lipsey, 1999. "Foreign Ownership and Wages in the United States, 1987 - 1992," NBER Working Papers 6923, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Martins, Pedro S., 2008. "Paying More to Hire the Best? Foreign Firms, Wages and Worker Mobility," IZA Discussion Papers 3607, Institute for the Study of Labor (IZA).
  2. Pedro S. Martins & Luiz A. Esteves, 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," Working Papers, Universidade Federal do Paraná, Department of Economics 0079, Universidade Federal do Paraná, Department of Economics.
  3. 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).
  4. Li, Zhiyuan, 2013. "Task offshoring and organizational form: Theory and evidence from China," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 94(C), pages 358-380.
  5. Martyn Andrews & Lutz Bellmann & Thorsten Schank & Richard Upward, 2012. "Foreign-owned plants and job security," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 148(1), pages 89-117, April.
  6. Joseph A. Clougherty & Klaus Gugler & Lars Sørgard, 2012. " Cross-Border Mergers and Domestic Wages: Integrating Positive 'Spillover' Effects and Negative 'Bargaining' Effects," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp136, Vienna University of Economics, Department of Economics.
  7. Sándor Csengödi & Dieter M. Urban, 2008. "Foreign Takeovers and Wage Dispersion in Hungary," CESifo Working Paper Series, CESifo Group Munich 2188, CESifo Group Munich.

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