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The takeover and selection effects of foreign ownership in Germany: an analysis using linked worker-firm data


  • Martyn Andrews,
  • Lutz Bellmann,
  • Thorsten Schank,
  • Richard Upward


We use a linked employer-employee data set from Germany to estimate the wage effect of foreign-affiliates in (the former) East and West Germany . In addition, the wage effects of the large number of West German affiliates which are located in East Germany are also considered. The implemented techniques allow us to control both for worker- and plant-level unobserved components of earnings. We find large selection effects both in terms of worker- and firm unobserved components of wages. The selection effect is larger for East German plants. Once the selection effect is taken into account, the genuine takeover effect is small and in some cases insignificantly different from zero. In contrast to the selection effect, the takeover effect is slightly larger in West Germany , where it amounts to 2.7%.

Suggested Citation

  • Martyn Andrews, & Lutz Bellmann, & Thorsten Schank, & Richard Upward, "undated". "The takeover and selection effects of foreign ownership in Germany: an analysis using linked worker-firm data," Discussion Papers 07/08, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:07/08

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    References listed on IDEAS

    1. Martyn Andrews & Thorsten Schank & Richard Upward, 2006. "Practical fixed-effects estimation methods for the three-way error-components model," Stata Journal, StataCorp LP, vol. 6(4), pages 461-481, December.
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    8. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May.
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    Cited by:

    1. Pedro S. Martins & Luiz A. Esteves, 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," Working Papers 0079, Universidade Federal do Paraná, Department of Economics.
    2. Sándor Csengödi & Dieter M. Urban, 2008. "Foreign Takeovers and Wage Dispersion in Hungary," CESifo Working Paper Series 2188, CESifo Group Munich.
    3. Martyn Andrews & Lutz Bellmann & Thorsten Schank & Richard Upward, 2012. "Foreign-owned plants and job security," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(1), pages 89-117, April.
    4. Pedro S. Martins, 2011. "Paying More To Hire The Best? Foreign Firms, Wages, And Worker Mobility," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 349-363, April.
    5. Joseph A. Clougherty & Klaus Gugler & Lars Sørgard, 2012. " Cross-Border Mergers and Domestic Wages: Integrating Positive 'Spillover' Effects and Negative 'Bargaining' Effects," Department of Economics Working Papers wuwp136, Vienna University of Economics and Business, Department of Economics.
    6. 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.
    7. Li, Zhiyuan, 2013. "Task offshoring and organizational form: Theory and evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 358-380.
    8. Aretz, Bodo & Busl, Claudia & Gürtzgen, Nicole & Hogrefe, Jan & Kappler, Marcus & Steffes, Susanne & Westerheide, Peter, 2009. "Endbericht zum Forschungsauftrag fe 13/08: "Ursachenanalyse der Verschiebung in der funktionalen Einkommensverteilung in Deutschland" (Aktenzeichen I A 3 - Vw 3170/08/10035)," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110510.

    More about this item


    Foreign ownership; wages; linked employer-employee data;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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