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Foreign-owned firms around the world: A comparative analysis of wages and employment at the micro-level

  • Hijzen, Alexander
  • Martins, Pedro S.
  • Schank, Thorsten
  • Upward, Richard

This paper provides the first microeconomic cross-country analysis of the effects of foreign ownership on wages, employment and worker turnover rates. Using firm-level and linked worker-firm data, we apply a standardised methodology for three developed (Germany, Portugal, UK) and two emerging economies (Brazil, Indonesia). We find that wage effects are larger in developing countries, and that for each country the largest effect on wages comes from workers who move from domestic to foreign firms. Employment growth after foreign takeover is concentrated in high-skill jobs. In contrast to widespread fears, there is no evidence that wage gains come at the expense of greater job insecurity; separation rates actually fall slightly after takeover. We conclude that the positive effect of foreign ownership on wages is not primarily driven by its impact on incumbent wages, but by its impact on the creation of high-wage jobs.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 60 (2013)
Issue (Month): C ()
Pages: 170-188

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Handle: RePEc:eee:eecrev:v:60:y:2013:i:c:p:170-188
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  15. Dirk Willem te Velde, 2003. "Do Workers in Africa Get a Wage Premium if Employed in Firms Owned by Foreigners?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(1), pages 41-73, March.
  16. Martyn Andrews & Lutz Bellmann & Thorsten Schank & Richard Upward, 2012. "Foreign-owned plants and job security," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(1), pages 89-117, April.
  17. 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.
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