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We compare wages in multinational enterprises (MNEs) versus domestic firms, the earnings of domestic firm workers with past, future and no MNE experience, and estimate how the presence of ex-MNE peers affects the earnings of domestic firm employees. The analysis relies on monthly panel data covering half of the Hungarian population and their employers in 2003-2011. We identify the returns to MNE experience from changes of ownership, wages paid by new firms of different ownership, and the movement of workers between enterprises. We find high contemporaneous and lagged returns to MNE experience and significant spillover effects. Foreign acquisition has a moderate wage impact but there is a wide gap between new MNEs and domestic firms. The findings suggest that MNE experience is valued in the high-wage segment of the local economy, connected with the MNEs via worker turnover.
Foreign-owned firms are often hypothesized to generate productivity "spillovers" to the host country, but both theoretical micro-foundations and empirical evidence for this are limited. We develop a heterogeneous-firm model in which ex-ante identical workers learn from their employers in proportion to the firm's productivity. Foreign-owned firms have, on average, higher productivity in equilibrium due to entry costs, which means that low-productivity foreign firms cannot enter. Foreign firms have higher wage growth and, with some exceptions, pay higher average wages, but not when compared to similarly large domestic firms. The empirical implications of the model are tested on matched employer-employee data from Denmark. Consistent with the theory, we find considerable evidence of higher wages and wage growth in large and/or foreign-owned firms. These effects survive controlling for individual characteristics, but, as expected, are reduced significantly when controlling for unobservable firm heterogeneity. Furthermore, acquired skills in foreign-owned and large firms appear to be transferable to both subsequent wage work and self-employment.
This paper uses data on individual wages in manufacturing industry for five African countries in the early 1990s to test whether firms owned by foreigners pay higher wages than do forms owned by locals for apparently equivalent workers, and whether such benefits accrue to all or only certain types of workers. We present two main findings. First, foreign ownership is associated with a 20-40 per cent increase in individual wages (conditional on age, tenure and education) on average. This is halved to 8-23 per cent if we take into account the fact that foreign-owned firms are larger and locate in high-wage sectors and regions. Secondly, there is a tendency in some countries for more skilled workers (using occupation and education categories) to benefit more from foreign ownership than less skilled workers, and this conclusion holds after accounting for the size distribution of foreign firms. We discuss, but cannot directly test, the plausibility of two explanations for these findings: 1) foreign-owned firms employ technologies that are more skill-biased than technologies in local firms and 2) skilled workers in foreign firms are more effective in rent-sharing than other workers. We contend that these explanations may not be mutually exclusive, hence cannot be empirically distinguished.
This paper explores the relationship between wages and foreign investment in Mexico, Venezuela, and the United States. Despite very different economic conditions and levels of development, we find one fact which is robust across all three countries: higher levels of foreign investment are associated with higher wages. In Mexico and Venezuela, foreign investment was associated with higher wages only for foreign-owned firms -- there is no evidence of wage spillovers leading to higher wages for domestic firms. In the United States there is evidence of wage spillovers. The lack of spillovers in Mexico and Venezuela is consistent with significant wage differentials between foreign and domestic enterprises. In the United States, wage differentials are smaller.
Numerous studies based on firm-level data have reported higher average wages in foreign-owned firms than in domestically-owned firms. This, however, does not necessarily imply that the individual worker's wage increase with foreign ownership. Using detailed matched employer-employee data, we examine the effect of foreign ownership on individual wages, controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions. We distinguish between foreign greenfields and takeovers and compare foreign ownership with both domestic multinationals and local firms. Our results indicate that employees in foreign-owned firms do not have systematically higher wages than comparable workers in similar Swedish owned firms.
The authors construct a data set by industry by state by ownership for establishments in the United States using 1987 and 1992 U.S. Census and Bureau of Economic Analysis matched data to investigate the relationship between foreign ownership and wages. They find evidence that foreign-owned establishments pay higher wages in manufacturing, retail trade, and other relatively low-skill industries, but not in other higher-skill industries. A growth in the fraction of employment in foreign establishments was not significantly associated with an increase in overall wages. There is no evidence of a wage spillover to domestic establishments.
Using data set for Ghana manufacturing, shows that foreign firms pay higher wages than domestic firms to workers that receive on the job training.
Foreign-owned establishments in the United States pay higher wages, on average, than domestically-owned establishments. The foreign-owned establishments tend to be in higher-wage industries and also to pay higher wages within industries. They tend to locate in lower-wage states, but to pay more than domestically-owned firms within industries within states. Wages in general and wages in domestically-owned establishments tend to be higher in states and industries in which foreign-owned establishments account for a larger proportion of employment. Foreign-owned establishments that were new in 1990, mostly takeovers, had lower than average wage levels in that year but larger increases between 1990 and 1991. Increases in sales per worker and average wages were larger where employment growth was lower, possibly an indication that lower-productivity, lower-wage workers were dropped by the new owners.
Foreign-owned establishments in the United States pay higher wages, on average, than domestically-owned establishments. Much of the difference is related to industry composition, but there are also differences within industries within states, 5-7 percent in manufacturing and 9-10 percent in other industries. Within manufacturing, the difference can all be related to establishment, state, and industry characteristics, but in other industries, a substantial difference in average wages in favor of foreign establishments remains even when these other determinants of wages are taken into account. Within manufacturing, the extent of foreign ownership in an industry in a state had no impact on wages in 1987 when these other factors were taken into account, but it was associated with higher wages in 1992. Outside of manufacturing, higher foreign ownership was associated with higher wages in both years, and in 1992, even with higher-wages in domestically-owned establishments. Outside of manufacturing, larger increases in foreign ownership in an industry in a state between 1987 and 1992 were associated with larger increases in average wages. The wage effect was confined to the foreign-owned establishments themselves