Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers

43 Pages Posted: 16 Jun 2008

See all articles by Pedro S. Martins

Pedro S. Martins

Nova School of Business and Economics; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Luiz Alberto Esteves

University of Siena; Federal University of Minas Gerais (UFMG)

Abstract

How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.

Keywords: foreign direct investment, ownership changes, worker mobility

JEL Classification: J31, J63, F23

Suggested Citation

Martins, Pedro S. and Esteves, Luiz Alberto, Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers. IZA Discussion Paper No. 3542, Available at SSRN: https://ssrn.com/abstract=1145921 or http://dx.doi.org/10.2139/ssrn.1145921

Pedro S. Martins (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

Luiz Alberto Esteves

University of Siena ( email )

Siena
Italy

HOME PAGE: http://www.sitenarede.com/luiz_esteves/home

Federal University of Minas Gerais (UFMG) ( email )

Curitiba, Parana
Brazil

HOME PAGE: http://www.sitenarede.com/luiz_esteves/home

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