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FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008

Author

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  • John S. Earle

    () (George Mason University - School of Public Policy and Central European University)

  • Almos Telegdy

    () (The Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences)

  • Gabor Antal

    () (The Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences)

Abstract

We estimate the effects of foreign direct investment (FDI) acquisitions on firm-average and worker-specific wages using universal firm-level panel data and linked employer-employee data for Hungary. Our identification strategy exploits a 23 year-long panel with 4,926 foreign acquisitions to match on pre-acquisition data and to control for fixed effects for firms, detailed worker groups, and worker-firm matches. The estimates after these adjustments imply positive effects of about 12-27 percent on average wages. In an extension to 983 foreign acquisitions subsequently divested to domestic owners, we find that much of the acquisition effect is reversed by divestment. Estimating by worker type, we find positive effects for each of 64 gender-age-education-tenure groups, for all major occupations, and for all deciles of the wage distribution; the magnitudes are fairly uniform except for some skill-bias defined by education, occupation, and wage quantile. Even incumbents show wage gains, although not as large as post-acquisition hires. The evidence implies little role either for measurement problems (in hours worked, compensation, or misreporting) or for residual selection (associated with firm or worker turnover), but suggests a strong cross-firm association of FDI wage premia with similar differentials in productivity.

Suggested Citation

  • John S. Earle & Almos Telegdy & Gabor Antal, 2012. "FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008," Budapest Working Papers on the Labour Market 1209, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    • Handle: RePEc:has:bworkp:1209
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Telegdy, Álmos, 2013. "A közszféra és a vállalatok bérei közötti átterjedési hatás Magyarországon
      [Public-sector pay spillovers in Hungary: Identification from a large sectoral pay increase]      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 555-578.
    2. Telegdy, Álmos, 2013. "The Effect of Public Wages on Corporate Compensation in Hungary," IZA Discussion Papers 7524, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    foreign acquisitions; FDI; earnings; wage differentials; productivity; difference-in differences matching; Hungary;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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