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Why Foreign Ownership May Be Good For You

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  • Hartmut Egger
  • Udo Kreickemeier

Abstract

We develop a two-country model with heterogeneous producers and rent sharing at the firm level. We identify two sources of a multinational wage premium: A composition pay higher wages, and a firm-level wage effect, because a firm makes higher global profits and thus pays higher wages in its home market when becoming multinational. With two identical countries, the wage premium is fully explained by firm characteristics. Allowing for technology differences between countries, a residual wage premium exists in the technologically backward country, but not in the advanced country.
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Suggested Citation

  • Hartmut Egger & Udo Kreickemeier, 2013. "Why Foreign Ownership May Be Good For You," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 693-716, May.
  • Handle: RePEc:wly:iecrev:v:54:y:2013:i:2:p:693-716
    DOI: iere.12011
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    References listed on IDEAS

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    Citations

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    as


    Cited by:

    1. Peter Egger & Marko Koethenbuerger, 2016. "Hosting multinationals: Economic and fiscal implications," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(01), pages 45-69, February.
    2. Maré, Dave C. & Sanderson, Lynda & Fabling, Richard, 2014. "Earnings and Employment in Foreign-Owned Firms," IZA Discussion Papers 8541, Institute for the Study of Labor (IZA).
    3. Dalgıç, Başak & Fazlıoğlu, Burcu & Varol İyidoğan, Pelin, 2016. "Doğrudan Yabancı Yatırımlar Kadın İstihdamını Artırır mı? Türkiye’de Hizmetler Sektörüne Yakından Bakış
      [Does Foreign Direct Investment Bring Jobs to Women? A Closer Look to Turkish Services Indust
      ," MPRA Paper 70790, University Library of Munich, Germany.
    4. Bircan, Çağatay, 2011. "Foreign Direct Investment and Wages: Does the Level of Ownership Matter?," Working Papers 618, Research Seminar in International Economics, University of Michigan.
    5. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.
    6. repec:ebd:wpaper:157 is not listed on IDEAS
    7. Carluccio, Juan & Bas, Maria, 2015. "The impact of worker bargaining power on the organization of global firms," Journal of International Economics, Elsevier, vol. 96(1), pages 162-181.
    8. Sabien Dobbelaere & Kozo Kiyota, 2017. "Labor market imperfections, markups and productivity in multinationals and exporters," Tinbergen Institute Discussion Papers 17-113/V, Tinbergen Institute.
    9. Anna Gumpert, 2015. "The Organization of Knowledge in Multinational Firms," CESifo Working Paper Series 5401, CESifo Group Munich.
    10. Defever, Fabrice & Toubal, Farid, 2013. "Productivity, relationship-specific inputs and the sourcing modes of multinationals," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 345-357.
    11. Gumpert, Anna, 2017. "The Organization of Knowledge in Multinational Firms," Rationality and Competition Discussion Paper Series 29, CRC TRR 190 Rationality and Competition.
    12. Gumpert, Anna, 2014. "The organization of knowledge in multinational firms," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100332, Verein für Socialpolitik / German Economic Association.
    13. repec:bla:worlde:v:40:y:2017:i:10:p:2056-2077 is not listed on IDEAS
    14. Gianluca Orefice & Nicholas Sly & Farid Toubal, 2015. "The Multinational Wage Premium and Wage Dynamics," CESifo Working Paper Series 5263, CESifo Group Munich.
    15. Gumpert, Anna, 2015. "The organization of knowledge in multinational firms," Discussion Papers 33/2015, Deutsche Bundesbank.
    16. Theresa M. Greaney & Yao Li, 2017. "Examining Determinants of Foreign Wage Premiums in China," The World Economy, Wiley Blackwell, vol. 40(10), pages 2056-2077, October.

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    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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