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Why are Productivity and Wages Higher in Foreign Firms?

  • Sourafel Girma

    (University of Nottingham)

  • Steve Thompson

    (University of Leicester)

  • Peter W. Wright

    (CEPR and University of Nottingham)

This paper uses a panel data framework to examine whether foreign firms in the UK have higher levels of productivity and set higher wage rates than domestic ones ceteris paribus, or whether this is due to unmeasured characteristics. Its main finding is that foreign firms are more productive, by between 8 and 15 per cent, being particularly efficient in their use of capital. These advantages feed through into the wage levels of their employees, whose wages are higher as a result, effects that are particularly pronounced for firms from the United States.

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File URL: http://www.esr.ie/Vol33_1Girma.pdf
File Function: First version, 2002
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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 33 (2002)
Issue (Month): 1 ()
Pages: 93-100

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Handle: RePEc:eso:journl:v:33:y:2002:i:1:p:93-100
Contact details of provider: Web page: http://www.esr.ie

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  1. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
  2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  3. James Tybout, 1998. "Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?," Development and Comp Systems 9805004, EconWPA.
  4. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc.
  5. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-40, September.
  6. Robert E. Baldwin & Robert E. Lipsey & J. David Richards, 1998. "Geography and Ownership as Bases for Economic Accounting," NBER Books, National Bureau of Economic Research, Inc, number bald98-1, December.
  7. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
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