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Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training


  • Holger Görg
  • Eric Strobl


  • Frank Walsh


While foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers, the causes of this remain unresolved. In a two-period bargaining framework we show that if training is more productive and specific in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employer-employee matched data set we verify that the foreign wage premium is only acquired by workers over time spent in the firm and only by those that receive on-the-job training, thus providing empirical support for a firmspecific human capital acquisition explanation.
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Suggested Citation

  • 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;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(3), pages 464-482, October.
  • Handle: RePEc:spr:weltar:v:143:y:2007:i:3:p:464-482
    DOI: 10.1007/s10290-007-0117-9

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    References listed on IDEAS

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    More about this item


    On-the-job training; foreign-owned firms; wages;

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F0 - International Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development


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