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Foreign Ownership and Wages: Evidence from Hungary, 1986–2008

Author

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  • John S. Earle
  • Ã lmos Telegdy
  • Gábor Antal

Abstract

This article estimates the wage effects of foreign direct investment (FDI) using firm-level and linked employer-employee panel data containing a large number of foreign acquisitions over a long period of rapid development in Hungary. Matching on pre-acquisition data, the authors find that much of the raw foreign wage premium represents selection bias, but that foreign acquisition nevertheless raises average wages by 15 to 29% when controlling for fixed effects for firms and highly detailed worker groups, and by 6% with firm–worker match effects. Acquired firms that are later divested to domestic owners experience a substantial reversal of the positive acquisition effect. No type of worker—defined by education, experience, gender, incumbency, and occupational group—experiences wage decline, but the patterns suggest skill bias in the gains from acquisition. The evidence implies a strong cross-firm correlation of FDI wage and productivity differentials, and an inverse relationship between FDI effects and economic development level of the sending country relative to Hungary.

Suggested Citation

  • John S. Earle & à lmos Telegdy & Gábor Antal, 2018. "Foreign Ownership and Wages: Evidence from Hungary, 1986–2008," ILR Review, Cornell University, ILR School, vol. 71(2), pages 458-491, March.
    • Handle: RePEc:sae:ilrrev:v:71:y:2018:i:2:p:458-491
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    Citations

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    Cited by:

    1. Paulina Broniatowska & Paweł Strawiński, 2021. "Foreign- and domestic firm ownership and its impact on wages. Evidence from Poland," European Journal of Industrial Relations, , vol. 27(4), pages 445-466, December.
    2. Miklós Koren & Álmos Telegdy, 2024. "Expatriate Managers: Effects on Firm Performance," CESifo Working Paper Series 11164, CESifo.
    3. Iga Magda & Katarzyna Sałach, 2021. "Gender pay gaps in domestic and foreign-owned firms," Empirical Economics, Springer, vol. 61(4), pages 2237-2263, October.
    4. Jonas Hjort & Xuan Li & Heather Sarsons, 2020. "Across-Country Wage Compression in Multinationals," NBER Working Papers 26788, National Bureau of Economic Research, Inc.
    5. Jonas Hjort & Xuan Li & Heather Sarsons, 2020. "Random-Coefficients Logit Demand Estimation with Zero-Valued Market Shares," Working Papers 2020-15, Becker Friedman Institute for Research In Economics.
    6. Köllő, János & Reizer, Balázs, 2021. "A koronavírus-járvány első hullámának hatása a foglalkoztatásra és a vállalatok árbevételére [The effect of the first wave of Covid pandemic on employment and firm revenue]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 345-374.
    7. Gianluca Orefice & Nicholas Sly & Farid Toubal, 2021. "Cross-Border Merger and Acquisition Activity and Wage Dynamics," ILR Review, Cornell University, ILR School, vol. 74(1), pages 131-162, January.
    8. Olga Takács & János Vincze, 2023. "Where is the pain the most acute? The market segments particularly affected by gender wage discrimination in Hungary," CERS-IE WORKING PAPERS 2304, Institute of Economics, Centre for Economic and Regional Studies.

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