Foreign Ownership and Wages: Evidence from Hungary, 1986-2008

53 Pages Posted: 18 Jul 2013 Last revised: 30 Sep 2016

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS); Central European University

Gabor Antal

Hungarian Academy of Sciences (HAS) - Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 21, 2016

Abstract

This paper estimates the wage effects of foreign direct investment (FDI) with firm-level and linked employer-employee panel data containing a large number of foreign acquisitions over a long period of rapid development in Hungary. Matching on pre-acquisition data, the paper finds that much of the raw foreign wage premium represents selection bias but that foreign acquisition nevertheless raises average wages 15-29% when controlling for fixed effects for firms and highly detailed worker groups, and 6% with firm-worker match effects. Acquired firms that are later divested to domestic owners experience a substantial reversal of the acquisition effect. No type of worker – defined by education, experience, gender, incumbency, and occupational group – experiences wage decline, but the patterns suggest skill bias in the gains from acquisition. The evidence implies a strong cross-firm correlation of FDI wage and productivity differentials, and an inverse relationship between FDI effects and level of economic development.

Keywords: foreign acquisitions, FDI, earnings, wage differentials, productivity, difference-in differences matching, employer effects, Hungary

JEL Classification: F23, F66, J31

Suggested Citation

Earle, John S. and Telegdy, Almos and Antal, Gabor, Foreign Ownership and Wages: Evidence from Hungary, 1986-2008 (July 21, 2016). Industrial and Labor Relations Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2183305 or http://dx.doi.org/10.2139/ssrn.2183305

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

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

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

7621 Pécs, Papnovelde u. 22
Budapest, H-1112
Hungary

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary
+36 1 327 3233 (Phone)
+36 1 327 3232 (Fax)

Gabor Antal

Hungarian Academy of Sciences (HAS) - Labor Economics ( email )

Hungary

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