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

Author

Listed:
  • Görg, Holger

    () (Kiel Institute for the World Economy)

  • Strobl, Eric

    () (Aix-Marseille University)

  • Walsh, Frank

    () (University College Dublin)

Abstract

Foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers in both developed and developing countries alike. Although a number of studies have documented and some attempted to explain this stylized fact, the issue still remains unresolved. In a multi-period bargaining framework we show that if firm specific training is more productive in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employeremployee matched data set we show 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 firm specific human capital acquisition explanation.

Suggested Citation

  • Görg, Holger & Strobl, Eric & Walsh, Frank, 2002. "Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training," IZA Discussion Papers 590, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp590
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    References listed on IDEAS

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    More about this item

    Keywords

    on-the-job training; foreign firms; wages;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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